Page 48 - Banking Finance January 2024

ARTICLE

to heavy operational expenses. Hence lower Net Interest P2P sites such as LenDenClub, i2i, CRED, BharatPe are
Margin restricts the banks to offer lucrative rates on engaged in lending to individuals and small businesses. Owing
deposits. People chasing higher returns than FDs go for the to the higher returns, the innovative concept has witnessed
alternate investment avenues and here comes peer to peer consistent growth in the business and the market size is
lending into the play. estimated to grow to USD 4 billion by 2026 as per a report
by PwC.
Peer to peer lending refers to the loans extended by
individuals and small businesses to another individual or small LenDenClub is the oldest P2P lending platform in India
business without any intermediation from banks. P2P lending operating since 2015 with over 1 Crore customers and over
is a form of financial technology which helps the people to Rs.13000 Crores invested through this platform. It offers 12%
come to the P2P portal which is a marketplace of investors returns on investments. It has different products wherein
and borrowers. At P2P website those borrowers may get investors may invest in lumpsum or on monthly basis.
loans which are otherwise not eligible or do not meet bank's Similarly funds may also be withdrawn at maturity or at
criteria while investors may get higher returns than the monthly intervals. It boasts hyper diversification also known
traditional investments. as fractional investment as its core values wherein
investment is broken down to as low
as Rs.1.00 to numerous loans to
minimize the default risk.

Mobikwik Xtra has features like no
lock in with free withdrawals and it
offers additional 1% for fixed tenure
investments. Investor community of
1.5 lacs plus has invested more than
Rs.2110 Crore through this portal. It
claims 12% returns to all the
investors with zero investment
fee.Some other platforms include
Finzy which allows the investors to
customize in terms of investment
period, amount and risk while CRED
Image source: https://corporatefinanceinstitute.com credits the interest earned on daily basis so that investor
may track the performance in real time basis. Faircent and
History and Market Overview i2i Funding boast returns as high as 20% and 30%
respectively.
P2P lending commonly known as social funding or crowd
lending is a relatively new phenomenon. P2P lending finds
Many other players are also operating in the market with
its origin in United Kingdom back in year 2005. Zopa was
different positioning strategies through product
the first peer to peer lending company after which Prosper
differentiation in terms of segments, returns, ticket size,
Marketplace launched in 2006 in United States. After
extent of assistance in recovery and customization in terms
financial crisis of 2007-2008 it gained momentum as more
of lending.
people turned to P2P lending sites while banks became more
cautious and risk averse.
As per an Experian report, around $350 billion has been
given out digitally in the country till date out of which 36%
Afterwards the concept spread across the countries like
customers are new to credit means they have started their
China, Australia and New Zealand etc. In India it was 2012
journey of borrowing with a digital loan.
when P2P lending was first introduced. Presently around 30
42 | 2024 | JANUARY | BANKING FINANCE