Technology has changed the way businesses are being conducted. It has brought sellers and buyers closer, with social media platforms filled with buy-and-sell groups. Just a few years ago, there was no AirBnB, Uber, Grab, Alibaba, Netflix, etc. All these companies are bringing people who provide products/services with the people who need them. Some call this disruptive technology.
Now, there is an even simpler way for a business to get a loan or for an interested investor to become a lender, using peer-to-peer (P2P) lending.
P2P lending is not new in the global market. It has been around already in more financially and technologically mature countries. Recently, P2P lending was introduced in the Philippines through a platform called MoneyMatch.
Developed by FinTech Global Inc., MoneyMatch is designed as a hub to benefit both lenders and borrowers and eliminates physical boundaries. It is meant to serve as a convenient and secure marketplace that allows both parties (lenders and borrowers) to maximize their financial potential.
How much is interest in deposits nowadays? Here in the Philippines, it is already less than 1%. Trust products still bring in single-digit interest rates (gross). But lending rates bring in interest rates of 15% on the minimum average and about 20% on the midrange average. So for those with some extra money to invest, it is a no-brainer that being a lender brings better return on one’s financial resources.
But as a lender, we have credit risks. I have personally lent money to individuals who never paid them back. That is a risk I bear if I lend out directly. But what if I lend out through a platform that safely matches me with a borrower?
This is where MoneyMatch comes in
P2P lending recognizes that it is not always easy for small businesses or individuals to borrow money or take out a loan from financial institutions. It may be for a housing loan, a new car, or starting capital for a business. Many such borrowers get turned down by lending institutions for different reasons and they are not always because the borrower’s credit is bad. Sometimes, it is just scarcity of funds available for lending and small-time businesses or private individuals are not prioritized. This is the reason why loan sharks and the borrowing scheme called “5-6” thrive. They prey on those who are having difficulty getting financing.
There are people also with extra money but who find current investment products’ interest rates too low and may want to invest in lending where the returns, as well as the added risks, are higher.
MoneyMatch hopes to be that platform that brings lenders and borrowers together in an online platform. It works for both parties. People who want to start investing through lending are given a way to do so safely. Borrowers, on the other hand, get their financing at loan terms they can afford.
How does the MoneyMatch process work?
Prospective lenders and borrowers go to the MoneyMatch website (www.moneymatch.com.ph) and fill out a registration form. They will also need to send required documents. A vetting process which includes some form of credit investigation will be done on MoneyMatch’s end. They said they are partnering with at least one credit investigation company and so will have access to credit ratings of borrower applicants.
Once a borrower or lender is registered, he has access to a dashboard where he can view the different borrower profiles and the amount they wish to borrow. A lender is not obligated to lend the whole amount; he can choose to lend only a portion of what someone wants to borrow. Let’s put that in an example. For example, if a lender has PhP 100,000, he can choose to lend that out in different ways. One, he can lend it all to just one borrower. Two, as part of usual prudent practice of not putting all eggs in one basket, he can parcel out his PhP 100,000 to 2 or more borrowers. That way, his credit risk is spread out.
Borrowers whose loan requests are approved get notified by email with detailed instructions on how to claim a loan. Loans extended to borrowers are easily withdrawn through any PBCom branch.
Investors/lenders, with sufficient funds in their MoneyMatch account, can view loan applications that are up for bidding, choose which loan requests to fund, and bid on it. Lenders will have the option to bid for more than one loan.
The whole MoneyMatch process takes only 24-48 hours.
Will it work?
P2P lending, being a new concept in the Philippines, will be tested by products such as MoneyMatch. Will it really work? I hope so. But the challenge I see for the MoneyMatch team, beyond just providing the online platform, is to ensure that there are enough safeguards for both the lender-investor and the borrower so that the interests of both parties are protected.
For more about MoneyMatch, you can find them on the following sites:
Disclaimer: This post only seeks to inform the public of the existence of such a platform. In no way is this an endorsement or recommendation by me to either invest or borrow. Further due diligence should be done by interested parties.