Microlending in Canada: CommunityLend, Prosper.com & Zopa. Where are they, and when are they coming?
Submitted by Dan on Mon, 06/04/2007 - 17:22
Welcome to Canada's PREMIER P2P Loan Blog. I hope to present, from a unique Canadian perspective, a valuable source of information on this style of auction credit and auction borrowing.
Check out the big September 2009 news about CommunityLend here!
Many Canadians have been watching with envy in the news, amongst their friends, and on US web communities in which they belong to about the recent idea of person-to-person lending, cutting out the big middleman, and replacing that middleman with a (relatively) tiny web-based one. Kind of like Ebay auctions taking over the old-school auction market.
Already, Prosper in the US has nearly $70 million in loans, and has been around 1.5 years. A few new entrants have come into the US field, including Virgin and even one with a Facebook tie-in. Zopa, in the UK, the first company to commercialize the concept 2 years ago, has also been very popular. Many other countries have minor players as well that are gaining significant traction every day.
But it looks like there will be at least one option coming very soon for Canadians.
CommunityLend hopes to launch their service in the fall of this year, and I certainly have my fingers crossed. At least they're backed by someone with significant banking experience that has also done a great deal of talks on the financial phenomenon of social lending. It looks to me like they will be the first to come out, though they sure are secretive about everything. I'll post another big post in the coming days on every tidbit of info I can find on them.
Zopa has recently licensed their technology to an Italian company, possibly paving the way for either Zopa or another one of the European players, like Ireloans to license their's to an entrepreneurial Canadian firm. Perhaps, that is CommunityLend's very plan, it is hard to say at this point.
I sure hope that a Canadian Prosper arm (and hopefully a future US competitor to Prosper) starts to allow Canadians to at least bid on US loans. I'd imagine that most of the security concerns for the Prosper.com service have to do with the borrowers, rather than the person bidding. The person listing the loan is far more likely to be up to something fraudulent, since they are trying to get money from people they don't know. But the person bidding on a loan is unlikely to be up to anything, and I believe that there should be little red-tape for this. However, as far as I know, they have no such plans, which is a shame.
I believe that the Canadian market would be a very successful one for any players that decide to enter it. Of course, many Canadians would like to get higher returns than the market can offer, especially after reading so many articles in newspapers and magazines about how the stock market is no longer the place to go, but private placements and private equity are. The Canadian dollar has risen significantly in the recent months, almost to par with the US dollar, so we'd like to invest some of our returns in now-low-cost US opportunities. Many large Canadian companies are getting bought out or at least their stock price is skyrocketing, so many Canadians are likely to do some profit-taking and/or don't want to buy these expensive assets anymore, lending to a golden opportunity for them (pun intended). The Canadian banks and credit unions are pretty notoriously known for being uncompetitive, so the interest rates on savings accounts and GICs in Canada lags that of the US, again, Canadians want higher earnings. Finally, it is still expensive in stock trading commissions for a Canadian to pick and choose what they want to own unless they're anteing up a large amount of money, so if one could selectively invest their money, $10, $25, $100 or $1000 at a time, they would probably love to take the opportunity.
The laws in Canada are also very favourable towards community lending. Many US states have rate caps, some as low as 7%, pretty much trashing the loan market for Prosper in some states. As far as I know, no Canadian province has one, and I've never heard of one in Ontario. The Canadian Federal Government does have a cap, of 60%, which I don't foresee as a problem.
The high level of internet accessibility in Canada, at home, at work, at the library or community centre means that there should be a great deal of users listing loans for others to bid on. Again, with the banks being notoriously uncompetitive, the reduction in the size and cut of the middleman should allow for some very attractive rates for those needing a loan. I also believe that Canadians are a bit more tech-savvy than the average American, at least we're more likely to use Firefox as our web browser and have more broadband connections per capita, so there should be better than expected user counts on both the loaning and listing fronts.
Anyways, in conclusion, I think that Canada truly represents a nearly ideal market for these types of services. It was somewhat sad to see it only starting out now, but at least now I know it is starting to begin.
Check back often, I hope to write several articles in the coming days, specifically about features I'd like to see in new services, and just which companies look poised to launch soon in Canada. One day, hopefully I'll be able to announce a company actually launching their service in Canada, hopefully...
22 reponses to "Microlending in Canada: CommunityLend, Prosper.com & Zopa. Where are they, and when are they coming?"
1. Zopa Loans
I had one. It cost me .5% more than a high street bank but I liked the idea of it. I has some communications problems with the head office, but the loan worked fine and I paid it out. I would use Zopa again.
2. you can renegotiate your
you can renegotiate your credit card interest simply by telling them you'd like to, and under the (alleged) pretense that you've received numerous credit card offers in the mail with zero interest or some other more realistic interest rate like 8/9/ or 10% and that you are considering transferring your outstanding debt on to those "credit card offers you received in the mail". It is somewhat of a bluff but they don't know that? It's worked for several friends of mine, including me. Keep trying if one rep says they can't help you. Call back another day and ask again to speak to someone about your interest rate/cc charges. Good luck! p.s. Suze Orman has covered this on her show and on Oprah, I didn't believe it until I did it!!
3. I refuse to pay the bank any more interest!
I wish I could tell you that my life sucks, that I had children to feed and that I was on the streets. The fact of the matter is I have debt. I have debt that requires me to pay $600.00 an month on a loan that I consolidated a credit line with and a credit card. Now my loan is 1/3 more than my total debt which is the cost of borrowing. Now I own a little more than $25,000.
Background, my debt was incurred over several years of not having a full time job, just cleaning people’s houses under a legitimate registered company name. I have always worked for my money. But I have come to realize that I paid my original money owed two fold because of interest the bank has charged me. So I am pleading with anyone that has a few extra dollars to contribute to the principal of my debt. Based on principal, I would really feel good about not giving the banking institution any more of my money then I have to. They are crooks and I have been taken for.
Thank you!
4. I've also just tried to get
I've also just tried to get into prosper, and was rebuffed as a Canadian. I'll be watching with baited breath to finally get out of my cc debt.
5. Please help
Hi everyone...I'm randomly posting every where in hopes that someone out there will help me. I'm in a rough situation currently and I'm trying so hard to get through this but I can't. I'm looking for someone to be my angel, if there is someone out there anywhere that thinks they can help please feel free to visit my website at http://mom1169.tripod.com/.. now I would love to sign up for the person to person lending but I can't because i have a credit score of 0...now what that means is that I don't have good credit ...nor do i have bad credit...i have nothing, not good or bad... so please if anyone feels like helping me please feel free to visit my site like I said...even a dollar would help
6. Spammer
i'll give you 25 cents so you can phone the Care Bears.
this is just someone playing a numbers game, trying to get some easy money from that 1% of people who are idiots. it certainly has nothing to do with social lending! nothing at all!
7. Church Involvement
Hi
It astounds me that groups like KAIROS and other faith based groups focused on social justice issues are not looking at pooling their faith brethern to create a PnP loan circle.
I was years ago helping a group provide small loans through a group called DEED Downtown Economic Enterprise Development based upon the Trickle Up Idea which provided unsecured small loans to startup business which helped people establish a business history, similar to the Grameed Model in Bangladesh
The funds to do this came from the United Church Conference
I am interested in small covenant loan circles that is prevalent in some ethnic communities but are prone to problems i.e pyrimid schemes
I too would be interested in participating in a PnP model
It is unfortunate that the Canadian version of Prospers can not respond to any requests for updates.
GLenn
8. Faith base group
That is a good idea sometimes but then that can also be a bad idea sometimes too. I think if the group is formed base on a religious background, people might think that it is more "secure" or if they are the lender, people might think "they will not check as much" and treat it more like a "charity" or worst, an "ABM" machine. I mean, if someone is willing to lend some other people money, we don't necessary have to be belong to a group or something. That's my 2 cents.
9. Anyone interested in starting something similar?
I mean, anyone who is reading this should be interested in microlending anyway, so anyone got any expertise in computer (Dan?) to start something like this in a small scale?
10. Interested
I am extreamily interested and have been researching such a venture for a while now. It has also become a funding issue. have you done any work on this?
11. Computer skill not enough
Hi Calvin,
I'm a programmer, I'm extremely interested in P2P lending, but the thing that stops me from actually working towards a lending site is the regulatory obstacles. It looks like the government is providing significant barriers to entry here, so why even make that initial investment if you don't have (or are unwilling to pay for) a legal team?
On the other hand, it would be interesting if somebody started a GPL'd lending web application that would reduce the *technology* obstacles for people who DO have that legal expertise. Something theme-able, like Drupal, only for P2P sites. My objectives, as a lender, could still be furthered by having lots of competition between the lending sites. :) [Maybe if we were really lucky, one of them would actually start and stay up!!!]
I'm not managing the project, but if it exists point it out to me. I code in PHP, Python, Ruby, Java, C, ... As far as web frameworks go, I have done a few production Ruby on Rails sites, and I've played with django.
12. Programming
Hi Dave, nice to hear that you are a programmer. I actually got a few business ideas that if you are interested, we can try out and work on. We can sit down together and discuss if our location is not too far apart. Where are you located? I am in Toronto/Richmond Hill area
13. How to control loan lost
Hi gangs, I am new to this board but being a lender myself for more than 10 years in a bank, and also did some P2P financing to some of my friends/relative, I am interested in this topic.
However, since I am not very familiar with Prosper or Zopa etc, I want to know what lender would rely on when they have an unknown user at the other end of the transaction? I know there are some rating thing like eBay does, but how reliable this is? Especially we are not lending out "toys or collectible" but real money?
14. Hey Calvin, The information
Hey Calvin,
The information available to a lender on these services is far greater than what Ebay provides. In fact, Ebay provides very little information about new sellers and new buyers, making things difficult and risky, even for people that mean well.
The information provided to lenders on these services is similar to that provided to a bank when making a loan: Credit Ratings, Incomes, Home Ownership Verification, Identity Checks, etc, etc. People can also put up their own writeup which can have who-knows-what legitimacy.
Feedback systems can also be implemented a la Ebay, which works pretty well for established traders and presumably for established lenders/borrowers as well.
The fact that we're moving around money, instead of a "toy" or a "collectible" is a bit of an advantage. It is _easy_ to transport (no "shipping delays" or "poor packaging"), but it is also easy to value and quality, since it is... actual money.
15. Thanks
Hi Dan, thanks for the info. My next question then would be, who would do this verification? The website (eg. IOU Central / CommunityLend )? or the Lender iteself? And how would Borrower submit these info? Eg. How do they check ID or even verify home ownership, as you said? (Home ownership verification require a title search on the property address, would they go into that length to verify if they only want to borrow a couple hundred bucks?
Thanks for any info you can provide, thanks.
16. The verification would be
The verification would be done by the company/website. Usually they actually forbid lenders from directly contacting their borrowers, probably to avoid any "altercations", but also, debt collecting laws are usually complex and lenders would probably run afoul of them.
Things like credit score are accessed directly from the bureaus. I doubt they would do "true" home ownership like you say by checking city tax/title records, likely they would ask for one to send in utility bills in their name or mortgage documents. Mortgages would also show up on a credit report. Though it is true they wouldn't go to a huge length for a loan of a $1000 (the minimum on most sites), but they could c"hain" it to utility bills like I said. Like you're probably thinking, there are issues with this.
Income would be by submitting pay stubs or letters from HR, which can likely then be confirmed by having the website call the company if they decide to do so.
Borrowers would submit info via fax or mail. IOU Central was accepting scanned uploads. Again, there certainly is a risk here, and that is why the websites/companies themselves will warranty that the user's info is true. Prosper I believe will purchase any notes in which the borrowers identity was "fake" or "stolen", IOU Central did state that they warranty that they have used commercially viable methods to confirm identity (or something like that).
17. Business Structure
Well, I got your idea of IOU Central/CommunityLend and all the website/company will do all the verification, and also will do all the lending and borrowing so no "fishy" collector is after the borrower etc. I am surprise IOU Central and all these website even offer "guarantee" etc. (unless the government is providing CDIC etc). I think as a better business model, the website should just facilitate a market place for people to borrow and lend, with full information access to them. (which is similar to eBay, which buyer and seller know who they are dealing with). Don't you think so?
18. Well, all they're really
Well, all they're really guaranteeing is that the borrower's identity is as they say they are, and that your deposits with the company (but not your loans) are safe. Of course, they're only worth the paper that they're printed, not sure if they have insurance policies on these sorts of things in case things go really sour.
Your other recommendation, of a less formal a la craigslist.org system is interesting, although the bigger more organized systems have the advantage in that they're relatively geographically neutral. If one area of the country has plenty of borrowers, and the other plenty of lenders, the problem solves itself. Also, the bigger companies facilitate payments, which might be a bit difficult on smaller scales, and otherwise making a bunch of $50 loans to a $1000 borrower realistic.
19. Great info
This blog has great info. I just ran into prosper's site and was disappointed I couldn't signup as a lender with a Canadian address. Will be anxiously waiting for a Canadian brand!
20. It looks like I have figured
It looks like I have figured out why the formatting wasn't working correctlly on Microlending.ca, but working fine on my personal site.
I've made edits to the comments for readability, will update my premier post, and finally start adding some more content.
21. Hi Dan,Thanks for the post.
Hi Dan,
Thanks for the post. It's nice to see some coverage of the P2P/Social Lending space from a Canadian perspective. We're from SocialLendingWatch and also cover the space. We look forward to seeing more posts on your site soon, and feel free to swing by SLW and get in touch with us!
All the best,
- Team SLW
22. CommunityLend
Dan ... thanks for the comments, and enthusiasm about this space and the potential in Canada. Obviously we share that enthusiasm, and as we work through the usual startup things, we hope to make some substantive announcements in the near future.
Colin
www.communitylend.com
PS ... cool blog technology
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