P2P (Peer to Peer) Lending?

Industry Insights
1

This new year, I am considering is there a way a portion of my profits from my investments can be put into some good use.

And while researching I came across the concept of P2P lending, microcredit to rural and small-town entrepreneurs. Say a potter in a remote village in Maharashtra is seeking a loan on Rs 10000 for raw materials to make toys which he plans to sell in the upcoming fair in his village next month. Now he can borrow money online through a P2P lending website at a certain interest rate. Lenders on the website can choose to invest him with small amounts, someone paying Rs 1000, someone else Rs 500 and so on and thus crowdfunding to fulfill his loan. Afterwards, he starts repaying the principal and the interest.

I found it a win-win for both borrower and the lender, where the borrower gets a loan at a considerably lower interest rate than the banks and finance companies, and the lender gets to diversify his investments that give him a return more or less like a bank FD. More than high return, it’s the impact factor. You feel good about your money made a difference to someone’s life. And certainly this is not a charity. It’s a social business that is bringing change apart from giving you returns (though lesser than other investments).

I researched more and found few websites working on P2P lending:-

  1. Kiva - It’s a global platform, but yet not active in India due to RBI guidelines.
  2. Rang De - A platform for social investing, that gives you 2% interest (3.5% APY).
  3. Faircent - Another P2P lending website. Haven’t explored it yet.

I dig more to find that this sector is still very unorganized and RBI has recently issued directions that P2P lending companies are now recognized as NBFC (Non-Banking Financial Companies) and has issued guidelines and mandatories for P2P lending.

I wanted to share this with you to learn if you also have similar views about investing in someone which not only earns you returns monetarily (possibly less interest rate compared to other instruments) but actually touches someone’s life for good.

Have you ever invested in any kind of P2P lending?
Let me know your experience.

3 Likes
2

These p2p company are really good.

But when they will be under RBI Control your money will be safe.

Investing on the rural people ideas will create a very good return to the society.

3

Exactly! You are uplifting someone’s life and the society overall. And it’s not donation or charity. Instead, it is igniting the human enterprising spirit. I agree, the returns for your investment will be low compared to other investment instruments. And hence I said a portion of your profits to be put under this.

And good to see that RBI is taking interest in this domain. I think this sector will see a lot of changes. Also, blockchain will add a new dimension to this.

Can Zerodha do something about it? We all have some unused extra funds lying in our Zerodha account. Some put it in Liquidbees until being invested or used as margin. Can that amount make a difference? Let me ask @nithin

4

@rupeshmandal You are thinking that those people are getting the loan at low interest rates, actually they gets loans at much higher rates because of the different fees charged by the company.

Zerodha as trading platform can open its own platform like those companies which is very different domain.

It will need lots of resources.

5

I got a offer from Walnut app, which has started it’s P2P lending with Walnut Prime

app
app720Ă—1280 110 KB

6

you can still pledge your shares to zerodha bro

7

Agree, that borrowers on such platforms get loans at a higher rate currently. Because the intermediatory costs are higher. But I am sure blockchain will someday solve this to bring the cost down. E.g. Etherum works on smart contracts. So smart contracts between borrower and lender. And the cryptocurrency has “from -> to” mentioned in the blocks.
The recent RBI guidelines talk about contract/ agreement between borrower and lender, bank to bank transfer, prohibit the NBFC-P2P entity to loan without the knowledge of lender, background check of the lender, the NBFC-P2P to act as an escrow account only.

I understand Zerodha is a different platform. But like how smallcase is a different company and is collaborating with Zerodha, maybe there is a need for another entity that completely focuses on P2P lending domain while Zerodha partners with them. For investors, it will be another way to diversify their portfolio beyond stocks and bonds by interest-based lending like how torrents work for file sharing.

I am just thinking aloud.

8

Here is an update from team Rang De - All social investments on their platform from today onwards will be considered as donations. You will not receive any return on your investments. Though you’ll receive a tax exemption certificate.

But with this move, unfortunately, it’s death of “social business” as it has turned into “charity”. More details

9

According to this article, if I am thinking right, Paytm may allow users to lend money. So the idle money in your wallet can be given to someone as loan and you can earn interest on that. Needless to say the interest rates would be lower than banks.

Currently, the banking sector is doing well. With PayTm entering Mutual Fund segment and lending business in future, Paytm would be a threat to the banks.

10

i got a lot of help here simply by checking this super informative thread! been searching for oral steroids
and this is all super helpful! thanks a lot for everything guys! was wondering if i can ask you questions rupeshmandal, if you can help…

11

You can always ask questions. If I don’t know he answers, someone who knows can answer them. That’s how this forum works.