The Revolution of Peer to Peer Lending in Microfinance

Transcription

1 The Revolution of Peer to Peer Lending in Microfinance European Microfinance Network Annual Conference Milan, June 2009 Laura Foschi, Etimos Margaux Gouté, Babyloan Julia Sandoval, Babyloan

2 Outline 1. P2P today (north/south) 2. Babyloan Case Study 3. Etimos Case Study 4. P2P (north/north)

3 Outline P2P Today (n/s) 1. Definition 2. Existing Models - Kiva - MyC4 - Microplace - Babyloan 3. Platform comparison

4 P2P Today intro Definition Existing Models This growth in online lending and investment platforms presents an opportunity and a challenge for MFIs intent on tapping the potential of online lenders or investors. - CGAP May 2009

5 P2P Today Kiva May 2009

6 P2P Today - MyC4 May 2009

7 P2P Today Microplace May 2009

8 P2P Today Babyloan May 2009

9 P2P Today Comparing platforms Kiva MyC4 Microplace BBL Yr established Based in USA Denmark USA France Identity Non profit For profit For profit Social business Model P2P P2P bidding Online brokerage P2P Intermediary MFI Providers Security issuers, MFI % interest earned by investor MFIs ; 11.7 avg Loans enabled 47 million $ 8,600,000 38,200 $ 240,200 Target micro MSME micro micro enterprise Max loan size 1,500$ 100,000-1,500 Business model Donations, interest revenue Transaction fee to SME Fees Transaction fee to investor, MFI management fee, interest revenue Platform fees 0 3% 2,5% to MFI Additional fees - Provider fees - to MFI Currency $ Eur, DC Eur Repayment to Monthly Monthly Monthly Intermediary Repayment to End of loan term Monthly End of loan term Investor Added Value Positive publicity Training providers and entrepreneurs as part of a grants and donations programme Positive publicity Currency Risk MFI, investor Investor MFI Credit Risk MFI, investor Investor Security issuer MFI

10 P2P Today Benefits Additional credit line: opportunity to diversify funding and increase OLB Low cost compared with commercial loans Enhanced funder credibility by adding an international funder on the balance sheet Open to small and big MFIs with minimum eligibility criteria Enhanced international reputation: Marketing

11 P2P Today Limitations Risks: Funder stability, reputation, operational and management expertise, regulatory risks Complexity of issues due to number of lenders and investors Costs: Foreign exchange risks, reporting requirements, operational and cost implications Managing unpredictable shifts in funding Customer privacy and consumer protection issues

12 Outline Case Study 1. Babyloan background 2. Mechanism 3. Selection Process

13 Case Study Babyloan Background Babyloan is the first French peer-to-peer microcredit lending website managed by the social business ABC Microfinance based in Paris. We provide a source of low-cost refinancing by leveraging the internet to channel interest-free funds from people in Europe to our MFI Partners. Small and medium-sized MFIs can benefit from our minimum eligibility criteria and low-cost refinancing to increase their OLB and grow. History Babyloan was launched in September 2008 by 2 social entrepreneurs, Arnaud Poissonnier and Aurelie Duthoit. Our founding partners include the French NGO ACTED, and banks BRED, Credit Cooperatif. Mission To become a leader in refinancing small and medium-sized MFIs by leveraging the power of the internet so that they may grow, and thereby participate in the fight against poverty. A project by: May 2009

14 Case Study - Babyloan key figures Key Figures (05/2009) 6 MFI Partners in 6 countries 222,000 euros loans raised online 765 projects funded 3,320 internet lenders Current Partners OXUS Microfinance Tajikistan Chamroeun Cambodia FINADEV Benin SEDA Vietnam CEPESIU Ecuador ICDC Philippines Objectives ,000 internet lenders 25,000 microcredit clients Refinance 14 million euros worth of loans for MFIs Current MFI Partners

15 Case Study - Babyloan Project page May 2009

16 Case Study - Babyloan Lender page May 2009

17 Case Study Mechansim Recover money Internet Lender Online Payment Internet Platform Monthly money transfer Reports Microcredit Entrepreneur Repayment + interest MFI

18 Case Study Selection process Babyloan Selection Process 1. MFI submits application 2. Selection Committee analyses application and provides a recommendation 3. Due diligence in the field (if necessary) 4. Advisory Committee makes final decision 5. Contract signed between MFI and ABC MF

19 Outline Etimos 1. Etimos background 2. Field application 3. Future P2P prospects

20 Etimos Background

21 Etimos Field application Ecuador Case Study : CEPESIU Babyloan s partner since March ,000 euros lent 22 micro-entrepreneurs financed Advantages and constraints Argentina Case Study

22 Etimos Future P2P prospects Babyloan Italy Limitations / Perspectives

23 Outline P2P north/north 1. Existing models 2. Explaining the gap in P2P solidarity microlending 3. French case study

24 P2P n/n Existing Models Note: Due to regulatory constraints, many For profit P2P lending sites have ceased operations in the US and Europe; however, a few platforms remain operating & are growing (e.g. LendingClub)

25 P2P n/n - Existing Models August 2008: US$164 million in loans had been transacted on Prosper. Nearly US$45 million had been arranged by Zopa UK and, as of July 2008, US$5.4 million on Smava (source: USAID)

26 P2P n/n Comparing platforms Lendingclu Prosper Smava Zopa UK Cashare b Yr established Based in USA USA Germany UK Switzerland Model P2P Auction P2P Auction P2P Auction P2P silent auction in UK; credit Union P2P Auction Interest for borrowers How it is defined 7,37% (A1) to 20,11 (G5) fixed by credit score and credit history Variable (Av 14,5%) Bidding / Credit grade partnership in US Variable Variable Variable Fixed by borrower/ Accepted by lender Lenders set their interest rate thresholds acc to loan term and risk rating Bidding Loan Size pounds Av Loan usage All All All All All Default Risk Lender Lender Lender Lender Lender

27 P2P n/n Characteristics No field intermediary, no monitoring Borrower doesn t benefit from advice More risky for the lender But interesting interest rate and information on credit history and credit score of the borrower Investor earns interest Loan product not limited to business loans Source: USAID

28 P2P n/n Absence in P2P solidarity microlending There is a notable absence in P2P solidarity microlending despite the large demand (exacerbated by the financial crisis) How to address this? Need a country-specific response: - Microfinance institute (NGO, cooperative, bank etc.) - Source of financing - Additional needs - Constraints to financing

29 P2P n/n Solidarity Microlending in France Babyloan / ADIE ADIE(non profit organisation) Source of financing: ADIE can only access loans from banks (Article of the Monetary and Financial Code) Babyloan and ADIE have proposed a change in the law to allow ADIE to access loans from other legal identities (individuals and enterprises)

30 Conclusion New possibilities with online platforms Considerations in P2P online microlending Potential in Europe