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My predictions for Peer to Peer lending 2013: where we will be in a years time!

January 14, 2013 Leave a comment

The year 2012 was an amazing one for Peer to Peer lending. We saw a significant interest from the UK and US governments in using it as a tool to rebuild their economies and helping small business get more capital. We also saw a 40% increase in the number of sites launched as well as move towards the mainstream for users of P2P as a source of funding.
What will 2013 bring as far as this exciting space is concerned? Here are my 4 predictions…(Start the drum roll!)

1. Mainstream finance NOW wants a piece of the pie

This already started towards the end of 2012:  Zopa , the largest and first lender in the UK received an undisclosed sum of new Venture Capital funding from the UK Private bank Rothschild. This was unthinkable just a few years ago: the whole idea of Peer to Peer lending is to get rid of the mainstream banks but now in a twist of events these very same banks have caught up on the importance of this sector and want a piece of the action! My view is that they should stay away from it: Peer to Peer lending  is all about giving the power of finance back to the man on the street: Zopa accepting this new funding round from Rothschild just throws this idea back in the bin! My assumption is that as Zopa has never really been a profitable company despite funding almost  260 Million in loans within the last 8 years, they simple needed cash in their coffers and decided not to bite the hand that feeds them!

2. Government involvement gets more structured,  regulation is on the way!

2012 saw the passing of the law on Crowdfunding in the US called the Jobs Act, this year will see this law turned into regulation when the SEC introduces the specifics regarding how the crowdfunding and Peer to Peer lending sector in the US will be regulated. This is a very exciting development as it means that equity crowdfunding which allows start-ups to raise capital in exchange for equity in their companies will become available to sophisticated investors as a new asset class. It may even become a new investment option for Pension funds. In the UK; th government has already indicated that it loves the whole idea of P2P lending by giving Zopa and Funding circle 20Million pounds each to help them reach more small businesses that need funding that the banks are not prepared to give. The new regulatory authority in the UK; The Prudential regulation Authority (PRA) has already indicated that it has P2P lending in its sights and will introduce rules and regulations mostly to give comfort to lenders and borrowers in the sector. This has been welcomed by the major UK peer to Peer lenders through the Peer to Peer lending association as they want more regulation so that they can reach more doubting Thomases who believe that the current light touch regime in the UK may mean that their rights are not protected. I will keep you posted on this one!

3. P2P will really become the new asset class for borrowers and lenders

I have been writing on this issue for the past 3 years wondering if P2P will ever be confirmed as the new asset class after cash, bonds, property, stocks and commodities. If the current ridiculously low rate of interest remain on savings accounts then this will be inevitable. Zopa boasts rate of 5.4% on funds lent on their site compared to a miserable 1.5% on savings accounts for the same amount with mainstream banks!  After factoring in the risks involved it definitely makes financial sense and lots of investors will start to see this in 2013!

4. The rise of Peer to Peer leasing and other variations of P2P lending

There has been a huge growth in offshoots of the Peer to Peer lending model such as peer-to-peer leasing where instead of loans, investors put money towards leases. There has also been an increase in the number of portals now offering invoice factoring. This is a form of lending whereby companies get a cash advance for the value of their current invoices by selling the value of their current invoices to a their party financier. Whilst factoring has been in existence just as long as mainstream finance, what is new is that factoring will use the online portal method that Peer to Peer lending has made famous by allowing companies to upload their factoring needs online and looking for third-party investors to provide financing based on their outstanding invoices. This is a very interesting development that means that small and medium-sized businesses have another new source of funding to build their balance sheets. WATCH this space!!!




Peer to Peer lending: The emergence of a new asset class

August 27, 2012 Leave a comment

Peer to Peer lending is fast becoming the next asset class just as stocks, bonds and cash currently are considered to be standard asset class options for investors. Although Peer to Peer lending has been on the rise for the last 7 years, it still hasn’t become what people would call a part of mainstream finance. In my view, this is just a few short years away, there are already clear indications that Peer to Peer lending, which involves regular people lending to each other without the need for a bank in between- is catching on as a mainstream idea for people’s investment portfolios.
I read an intriguing piece on this very subject on the New York times (Peer to Peer lending: what the future holds: The article mentioned that Peer to Peer lending volumes had already hit $25.6 million in June this year on just two Peer to Peer lending platforms compared to just $12.2 million a year ago: this is an astounding 110% increase in growth in just 12 months!
To add to this, Lending club, the largest Peer to Peer lending player in the US market has indicated that almost 30% of their lenders are institutional investors. This means that Peer to Peer lending is no longer applicable to just individuals but this phenomenon is now attracting companies who wish to get a bigger bang for their buck, rather than rely on banks with their miserly interest rates for deposits or the unpredictable stock markets. The current statistics for investor returns on US Peer to Peer lending sites is at 9.5% with record low defaults rates of 2%.
On the borrower side, they also stand to benefit with loans at an average of 8% compared to almost 29% that individuals are paying on credit cards. These statistics attest to the huge appeal that Peer to Peer lending has created among both investor class and the borrower class.
As an asset class for the investor or lender, the reason why Peer to Peer lending makes so much more sense is that investors are currently experiencing volatility spikes in their stock market investments. In addition, their diversification strategies don’t always seem to work as most investment classes are now moving in tandem with each other. On top of all this, there is a clear lack of confidence in being able to reach one’s financial goals using the normal methods we used before, i.e savings, buying bonds as an institutional investor or adding certificates of deposit to your investment portfolio. The point here is that it is actually possible to triple your returns without taking additional risk through being a lender on a P2P platform.
Although Lending club, Zopa and Prosper the better known P2P lending platforms, it would be a wise decision to try some new platforms that have done well by their own right and that each loaned more than $10 million within just 3 months of their establishment:, and UK payday loans lender
In a move that signals the importance of this growth industry, support sites have come up that help users determine which sites are the best to use and which ones have the best returns by providing research and algorithms to help. They are, and for those who need to crunch numbers before they make any kind of lending or borrowing decision is your best bet. Another ancillary service that helps provide businesses with a technology platform to set up a peer to Peer lending website is MyAzimia, a niche technology company that focuses on providing tried and tested platforms to P2P lending companies in Europe and the US.
The Peer to Peer lending industry is set to continue to grow exponentially over the next 10 years; the UK government has already set aside 100million pounds to support these companies over the next 5 years. This is because it has recognized the importance of this industry in providing a viable alternative to the mainstream banking industry which we know is riddled with governance problems. This is an industry to watch and I believe other governments will follow suit and realize its importance in due time. In the meantime, it makes sense to look at P2P as a viable alternative asset class to boost your portfolio as a lender or to get a competitive no strings attached loan as a borrower.

The US Crowdfunding JOBS Act: How it will impact you in a nutshell

April 27, 2012 Leave a comment

The Jumpstart Our Business Start-ups law or aptly named JOBS act has shaken the crowd funding industry in the US and created a whole lot of buzz in Europe too. We in Europe also anticipate a similar act being passed by our governments as they continue to battle with historic deficits, high unemployment, Moody’s downgrades and the constant threat of sovereign default.

On March 22, the JOBS Act was approved by the US Senate in a 73-26 vote and President Obama has since signed the act into law. This law was an excellent show of of bipartisan support which we see on very rare occasions within the US Senate.

Here’s what the law means in a nutshell and this is how it will affect you as an entrepreneur or an investor:

  • Crowd funding is now ‘kosher’ and available to the ma and pa on the street, this means even your mom can invest in crowd funding! The Act stipulates that entrepreneurs can raise up to 1Million per year through approved channels and the aim is to protect investors from possible losses by limiting the amount one can invest by tying it to their incomes. For example., investors with incomes of 100k or less will be limited to 5% or $2k of investments while those making over 100k/year will be limited to 10% or $10K
  • Companies can now get a longer grace period before having to report financial data on their operations. This is great for small companies which are easily impacted by the high costs of financial accounting and audits and this means they can invest their capital back into their businesses instead of enriching the accounting firms! In fact, the act allows them to sell up to $50million in shares and can have as many as 1k shareholders before even considering going public. This is a welcome relief and a real jump starter for companies to raise capital without the associated fees and regulatory requirements for going public.
  • Crowd funding sites will also be required to provide their users with financial education materials which will help to inform them and give them an idea of the risks that they take by investing in crowd funding. This means an increased responsibility on the part of sites to ensure as far as possible that investors understand what they are undertaking.
  • The act creates the term’ intermediaries’ which will be the online portals used for the process of crowd funding. The Act specifies that the portals must not give investment advice or solicit for investment and must not pay compensation based on sales. This is an interesting requirement and will mean that the crowd funding portals out there will have to make changes to their core platforms to ensure that they are compliant. They will also need to be registered in future but in a more streamlined manner. This will also mean that well known portals such as Kickstarter may have to change their revenue models to be compliant: what this means for their market share and continued success, only time will tell.
  • The Act also gives investors in crowd funding platforms the right and the ability to bring a civil action against an issuer for material misstatements or omissions. This will bring greater accountability within the crowd funding sector as previously, issuers were not subject to such stringent standards. This will mean that the businesses listed on crowd funding platforms will have to do more to explain their business models and provide more detail to investors before they can part with their investment funds.

Overall, there are rumblings in the sector with commentators saying that the act will only serve to ‘Ghettoize’ crowd funding as it will become available to every Tom, Dick and Harry. While ON the other hand, others have praised the new protection standards that have come in as being way overdue.

All in all, the passage of the act has really helped to raise the profile of crowd funding as not just a passing fad but as a key to stimulating the US economy and helping small businesses raise capital without having to resort to the Venture Capitalists. It remains to be seen if the act will lead to a boom in crowd funding or have the opposite effect. Either way, this act has served us well in this industry by showing just how relevant it is and its importance in creating businesses, employment and contributing to the growth of the US economy.

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Crowdfunding 101: 5 things to keep in mind before you launch a successful crowdfunding site

November 24, 2011 Leave a comment

Crowdfunding is all the rage at the moment and has seen an unbelievable amount of activity over the last 3 years. Statistics say that a new crowdfunding site is launched almost every week with different aims and purposes attached, be it a site to help developers sell their mobile phone apps ( or sites to help rejected writers publish their books online without the need for snobbish publishers( or even social cause giving sites that help the community make donations to good causes: the list is endless and keeps growing every minute! If you’re thinking of a way to join the revolution and start your own crowd funding site to attract the masses, here are some tips on how to go about it:
1. Find a resounding theme that creates passion
I just mentioned a couple of crowd funding sites above and all of them cover really interesting themes like self- book publishing, funding independent artists or even helping people get funding for pet projects that never made it past the door of that Venture capitalist! When you select your theme, make sure it resonates with people and fills a gap in the market place effectively, most of all make sure you have a passion for it! Be it philanthropy/ giving, funding artists or film funding make sure it’s relevant and address a real need in the community. There are still loads of themes that haven’t been explored yet in crowd funding but I’m keeping that to myself for now!
2. Create a community before you launch the site
This is a really key issue to consider and execute that loads of people completely miss. The whole idea of crowd funding is bringing together a community of like-minded people to achieve a certain purpose, without this community of people you won’t have an iota of a chance to achieve anything! There are loads of ways to do this, for example while building your site, allow users who land on your page to sign up for email updates or a newsletter or use social media such as Google plus, Twitter or Facebook to create a following while you build your site. This way people will get to know you and your purpose before the site is launched and you will have followers who will already be curious to see what you’re up to. For example, Kickstarter ( had thousands of followers before they launched and now have over 150k followers a short time after going live.
3. Make sure your site is secure and hacker-proof
Yes I know that there is no site that is hacker proof (we know how many times the US Pentagon servers have been hacked and they are supposed to be the world’s most secure!) Do all you can to ensure that the site is secure as people will be providing you with their secure data such as credit card and bank details. The least you should have is an SSL (Secure Sockets Layer) capability which is easy to build and integrate into your site. If your crowd funder community has any inkling that your site is not secure they will leave the site in droves and you will never be able to recover from that in a million years!
4. Powerful visuals and a neat site design
You’d think this goes without saying but I have seen a huge number of awfully constructed crowd funding sites that are a real pain to use and click through. This is something you need to think through during the site development stage. What helps is to have a look at sites such as Kickstarter or Crowdcube ( which I would say have really versatile, user friendly interface with great visuals that are not ‘in your face’ and that are a joy to use. Take time to think through the design of the site with your site provider and don’t feel shy to look at what’s already out there to get ideas!
5. What’s in it for me/ the crowd?
This is an easily forgotten tenet of the any successful crowdfunding strategy: your cause has got to have some kind of reward for the crowd funder’s participation. This could be in the form of a cash prize or simply providing motivation so that people have real meaning in their lives from participation. Also, some kind of acknowledgement and recognition could be another way of giving the crowd something back. For example, Crowdrise ( its crowd winning each week for the users with the highest value of points that are gained through donating on the site. Crowd cube also encourages projects featured for funding to create rewards for their funders.

Whatever cause you decide to pick have fun creating your site and good luck!!

Author: Kanini Mutooni
Founder: www. and

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too many crowdfunding sites? here’s how to select the good from the mediocre

November 10, 2011 Leave a comment

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crowdsourcing; the new outsourcing model

November 7, 2011 1 comment

This is a good short article that summarises the benefits of a crowdsourcing model for both users and entreprenuers… extremely interesting trend!

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Why donating is not just about giving money..

November 5, 2011 Leave a comment

Great article that expounds on the beauty of other types of giving using innovative crowdsourcing tools..

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