Understanding Peer to Peer lending


Africa is still acquainted with traditional sources of lending. When approached with the notion of P2P lending, people always think of it in terms of a bank or a microfinance, or perceive it as something illegal (419). This article has as objective to explain this concept somehow new in the continent, expanding on its history and presenting its advantages for both investors and Borrowers.

Peer to peer lending goes by many  names. It is also called social lending, person to person lending or p2plending.  It can be defined in this simple way:

individuals lending money (investors) to other individuals (borrowers) without a banking    intermediary.

Today, with the explosive growth of the Internet and online social networks, this concept has been brought online.  So now, borrowers can borrow money from people they have never met and investors can lend money to many anonymous borrowers just based on their credit information. In 2005, Zopa launched in the U.K. as the world’s first online p2p lender, still number one company   in the U.K. market, followed by Prosper and Lending Club in the United States respectively in 2006 and 2007. Several platforms later on in Europe, and other parts of the world. The African market has seen the emergence of Platforms like Rainfin in South Africa, 2010, and Ovamba in Cameroon in 2014, created in United states in 2013.

With P2P, there is no need for borrowers to obtain loans from a bank any more when they can turn to their peers, saving money with a lower interest rate, and obtain their money fast, which is very important for pending business activities. Investors can earn great returns on their money, and above all, they invest and help real people and businesses to grow, not in faceless banks or mutual fund, which is more tangible and concrete.

Quote from Ovamba CEO, Marvin R. R. Cole

Whether you are a borrower or investor, peer to peer lending is the wave of the future. It is just getting started. In a very close future, we expect that most people will invest and borrow money this way. So come and join the 21st century way of lending money.

Sources: Understanding peer to peer lending of Peter Renton