Peer to peer lending

Peer-to-peer lending or social lending refers to a transaction between two parties (lender and borrower) with no intermediation of a traditional financial institution. The Internet has been the enabling technology for social lending allowing this interconnection.

Although there are several models, the most commonly used is the one using micro finance institutions. On the one hand MFI provides the link to the borrower. And on the other hand the web platform provides the link to the lender closing the chain.

Despite the high complexity of the system, the costs remain relatively low. By peer to peer lending someone in Finland is able to connect with someone in a rural village in Tanzania.

Peer to peer lending costs

Although peer to peer lending services are relatively low, there are some costs that need to be covered. These costs are mainly related to the bank transfers and currency change fluctuation. Every time that there are funds to be transferred to a partner in an emerging country, there is a cost. Another important cost is the maintenance of the website to continually improve and adapt the services in the best way to Amifi’s community.