I think that the developments in peer to peer lending in New Zealand are pretty cool. One thing that I reckon is really cool is the way each P2P lender seems to have taken a different approach.
I was stoked when Harmoney first came out, because they make such practical sense of money lending. I like the way that the descriptions of each loan make it possible to see lending for what it is – a useful exchange. I’m sitting here with money now, happy to give up use of it in exchange for more money later. There’s someone out there with an identified need for something, and they’re willing to pay money later for use of it now. I just don’t have that connection when I put my money into a savings account.
Squirrel took a different approach. It’s sort of simpler to invest on their platform. You don’t have to worry about spreading your investment out over lots of loans. They have Loan Shield, which effectively spreads the risk of defaults already. Now they’ve introduced a secondary market, so you can pass your investments on if you need to get your cash out. The arrangement is that someone else effectively invests in the remainder of your loan at the same interest terms, so its still pretty simple. I think it’s really cool that they’ve got this option. It significantly reduces one of the risks of investing with them (what if my personal circumstances change and I want to regain use of the money). More than that, to me, it adds legitimacy to the product. I bought “shares” in Squirrel when they raised equity through Snowball Effect. But I probably can’t sell those shares anytime I want (technically, I might be able to make arrangements). I knew that was part of the bargain when I bought into them and I’m ok with it, but without the ability to sell them, they just don’t seem like proper property. I guess that’s why I’m so pleased with Squirrel setting up a secondary market.
While I’m at it, I should probably mention the other P2P lender I’m familiar with. Pledgeme have recently ran their first crowd-lending campaign. Pledgeme’s P2P lending is very different from the other two. One of the cool things about crowdfunding a project is the community you build, and Pledgeme’s lending is really focussed on community. You can’t fractionalise your loan into $25 lots, or count on a default-spreading system like loan shield. But the loan is made to a specific organisation that pitches a specific need. It will be interesting to see what other campaigns come along, but this first one, for Eat My Lunch, was a great way for people to mix investment with support of a cause. I have “shares” in pledgeme (who crowdfunded themselves, twice) and was excited to be the first pledger on their first lending campaign.
There’s also Lendme, but I couldn’t sign up on my phone and haven’t gotten around to it yet, so I don’t know much about them! Houses I hear. Not sure. Sorry!
So, what started as a post about Squirrel’s news has turned into a bit of a ramble about New Zealand’s P2P lenders and why I think they’re cool. I’m going to try to make my posts a little bit more sensible in future, but I think I need to get into the habit of writing, so today it’s just a ramble.
Thanks for reading!