7.3 Peer-to-peer lending

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    Society 3.0 is a paradigm that characterizes itself by moving around the establishment, and whose citizens organize things as much as possible themselves. You will find people in social networks prepared to lend and borrow money to and from like-minded people. This is called peer-to-peer lending.

    In the distant past, we used to do this as well; in fact, this is how the Rabobank in The Netherlands, the Raiffeissen Bank in Germany, or the Credit Agriculture in France came into being cooperative banks.

    Now, we have a website for that, and you can look further than your street or your family – you post how much money you want to lend, what you need it for, the interest rate you want to pay, and in how many installments you intend to pay off the loan. People who want to lend you the money can sign up for just a small part of the desired amount. Even here, the level of interest is linked to the amount of risk. Some sites even give you a credit rating, so moneylenders can decide how much of a risk they want to run. The amounts that are loaned and borrowed range from €1,000 to €25,000. Like-minded people understand each other’s needs, businesses, and risks. Experienced IT professionals can, for example, help starting IT workers in their start-up businesses.

    The peer-to-peer initiatives have exotic names like Zopa, Prosper, and Fosik. There is Smava in Poland, and Paidai in China. At the American company Prosper, almost $600 million have already been distributed, and over 1,850,000 people are participating in this peer-to-peer lending enterprise.

    Start-up companies or producers can turn to Kickstarter.com, a website that mediates venture capital on a small scale for projects that have a clear start and end. The amounts can run up to, and even over, a million dollars. During the re-editing process of this book, I learned that Ubuntu, an open source software platform, is running the biggest crowd funding action so far on the site Indiegogo: their goal is to raise over 30 million dollars.

    The importance of these platforms is not only the availability of money, but also the presence of (prospective) clients. If nobody wants to give money for your idea, perhaps you should rethink it?

    In Belgium, over 100 organizations, from unions to NGOs, are working together with over 40,000 civilians to found the NewB, a new, cooperative, peer-to-peer bank. This initiative started in March, 2013, and is presently in the process of becoming a real bank – however, a bank whose values, according to their manifest, are “simplicity, modesty, transparency, and only investing in local, sustainable initiatives.”

    In The Netherlands, various groups are working to establish credit unions, however, the establishment is resistant, and our legal system doesn’t make this an easy journey.

    The Swedish bank JAK operates without using interest rates. Members save up money, and then borrow from the big pot. So, they are an old-fashioned, reliable cooperative savings bank, provided they operate without calculating interest.

    “The JAK Members Bank is for a just and fair economy. By this, we mean a sustainable economy that takes all environmental costs and gains into account and aims to increase long-term prosperity for everyone. Through its savings and loan program and its efforts to spread information about the ill effects of interest on money, JAK is working actively to promote an economy that does not exploit people or nature.”

    Individual participants, and also community projects, can borrow money, but it all starts with saving. The savings serve as a foundation for a loan that can be increased by a certain factor. This is connected to the available liquid assets. During the loan term, money is paid off and saved, so at the end of the term, the saved amount is equal to the loan. Saving points are used as a monetary unit. Only a fraction is paid for system costs, plus a 6% deposit as a standing security. Nowadays, there is no need to save money first at JAK. The bank has become a “real” bank, according to Swedish legislation. As a result, the deposited savings are covered by state guarantees. The amount of repayment is much better than with traditional banks. And, because no interest is charged, the capacity for installments from participants is very high. That is why the average term of a home loan ranges from nine to eleven years, which is, in old monetary terms, “pretty quick.”