Indirect P2P Platforms

This paper reviews the evolution, prospects, and challenges of the indirect person-to-person (P2P) model. It identifies and compares indirect P2P participants along criteria such as their target markets, risk tolerance, and offering of financial returns. The paper highlights advantages and disadvantages faced by an MFI working with online microfinance intermediaries. It also discusses issues raised in CGAP’s 2009 Focus Note IX about online funding.

The paper states that indirect P2P platforms have emerged as a viable industry segment and have contributed significant amounts of risk-tolerant, low-cost capital to microfinance. They have proven their fund-raising capacity and ability to connect lenders and borrowers. Conclusions include:

• Increased access to risk-tolerant indirect P2P funds spurs MFI product innovation and helps MFIs to improve the quality of their products and services;
• Indirect P2P platforms offer MFIs low-cost funding and lead to savings, improvements in MFIs’ core product offerings and expansion into new areas of coverage;
• Indirect P2P platforms help to further connections and reduce costs through mobile technology and management information systems integration;
• Indirect P2P market will witness greater collaboration as technology assists practitioners in connecting lenders to borrowers.