Peer-to-peer lending and community development finance

Abstract

Peer-to-peer (P2P) networks directly connect computer users online. Popular P2P platforms include eBay and Craigslist, for example, which have transformed the market for used consumer goods in recent years. Increasingly popular, however, are P2P lending sites that facilitate debt transactions by directly connecting borrowers and lenders on the Internet. In the summer of 2008, the Center for Community Development Investments assembled a working group of community development leaders, investors, and Prosper Marketplace, the largest P2P lending platform in the world, to discuss the potential community development implications of the innovation. This working paper documents this discussion and explores P2P lending in greater detail. Part I offers background on P2P and the state of the P2P lending industry; Part II outlines the potential community development finance implications of P2P; and Part III discusses the working group and next steps necessary to successfully marry P2P technology and community development finance.Loans ; Internet