NDLI: P2P Lending and the Msme Sector

Please wait, while we are loading the content...

IIM Calcutta Annual Reports

Volume 10 Issue 1, August 2022 (10th Anniversary Issue)

Volume 08 Issue 1, April 2022

Volume 07 Issue 3, December 2021

Volume 07 Issue 2, September 2021 (9th Anniversary Issue)

Volume 07 Issue 1, June 2021

Volume 06 Issue 4, March 2021

Corporate Governance in India: Understanding the History and Peeking Into the Future

Herding and Financial Markets: the Case of Reddit Daytraders Versus Hedge Funds

P2P Lending and the Msme Sector

Return of the Market Stabilisation Scheme?

The Cost of Data Breaches

Volume 06 Issue 3, December 2020

Volume 06 Issue 2, August 2020 (8th Anniversary Issue)

Volume 06 Issue 1, June 2020

Volume 05 Issue 4, March 2020

Volume 05 Issue 3, January 2020

Volume 05 Issue 2, November 2019

Volume 05 Issue 1, September 2019

Doctoral Theses

MBAEx Business Review

Opinion Pieces of IIMC Faculties

Faculty Publications

P2P Lending and the Msme Sector

Content Provider	IIM Calcutta
Author	Chatterjee, Teerna
Description	Teerna Chatterjee is currently working as a credit manager at the Indian Bank (formerly Allahabad Bank). She has close to ten years of work experience in the banking sector, working in the agricultural credit as well as in the general credit departments. She did her Masters in Agriculture from Bidhan Chandra Krishi Viswavidyalaya (BCKV), West Bengal.
Abstract	Over the years, we have witnessed the emergence of several e-commerce business models in the financial domain. One such business model is Peer-to-Peer (P2P) lending, a form of crowdfunding through which money is raised for the disbursement of credit and then gets repaid with interest (Dhawan, 2018). Crowdfunding is a method of funding through money raised from a large group of individuals, usually with the help of a platform, including online platforms that act as intermediaries (RBI, 2016). Thus, P2P Lending is "the use of an online platform that matches lenders with borrowers in order to provide loans that are typically unsecured" according to Dhawan (2018). This article explains Peer-to-Peer (P2P) lending and discusses its benefit and challenges for the MSME (Micro, Small, and Medium Enterprises) sector. A P2P lending platform is a marketplace, matching a set of borrowers directly with the group of investors (or lenders). The platform, in turn, charges a transaction fee for every transaction encountered through it. Individuals register themselves on the P2P platform by providing key information like personal details, professional details, and financial details. The platform then performs due diligence by verifying the information itself for assessing the creditworthiness of the individuals. Thereafter, the platform lists all approved borrowers and lenders who can participate in lending or borrowing on its portal. On P2P lending platforms, lenders can observe borrower loan listings, borrower's personal, professional, and financial information, loan purpose, and a brief description as to why lenders should make the loan offers to them. These details help lenders make an informed decision about making a loan to a borrower. The borrowers receive offers from numerous lenders, and likewise, lenders can also propose lending offers to multiple borrowers, thereby diversifying the default risk (Thanawala, 2020a). When the funding for a loan becomes 100%, the loan can be ready for disbursement, subject to the borrower’s acceptance. Disbursal occurs only after signing of the agreement of loan between borrower and lender. After that, the money is transferred to the borrower's account from the lender for the loan amount, and EMI begins to transfer from the borrower to the lender. According to the RBI, India had 21 P2P Lending companies as of 2018 (RBI, 2018). Some of them are involved in businesses directed at microfinance activities. The main aim of the P2P lending firms is to create a social influence and provide easier access to credit to small entrepreneurs and MSME. Thus, "P2P Lending platforms are largely tech companies registered under the Companies Act and acting as an aggregator for lenders and borrowers thereby, helping create a match between them" (Roy and Lele, 2016).
Language	English
Publisher	The Financial Research and Trading Laboratory (FRTL), IIM Calcutta
Publisher Date	2021-03-01
Access Restriction	Open
Subject Keyword	Social Capital Peer-to-Peer (P2P) Micro, Small and Medium Enterprises (MSMEs) Cost Economics FinTech
Content Type	Text
Resource Type	Article

Central Library (ISO-9001:2015 Certified)
Indian Institute of Technology Kharagpur
Kharagpur, West Bengal, India | PIN - 721302

See location in the Map
03222 282435
Mail: support@ndl.gov.in

Sl.	Authority	Responsibilities	Communication Details
1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
5	Website/Portal (Helpdesk)	Queries regarding NDLI and its services	support@ndl.gov.in
6	Contents and Copyright Issues	Queries related to content curation and copyright issues	content@ndl.gov.in
7	National Digital Library of India Club (NDLI Club)	Queries related to NDLI Club formation, support, user awareness program, seminar/symposium, collaboration, social media, promotion, and outreach	clubsupport@ndl.gov.in
8	Digital Preservation Centre (DPC)	Assistance with digitizing and archiving copyright-free printed books	dpc@ndl.gov.in
9	IDR Setup or Support	Queries related to establishment and support of Institutional Digital Repository (IDR) and IDR workshops	idr@ndl.gov.in