Crowdlending

Crowdlending is a form of crowdfunding in which individuals or institutions lend money to borrowers through online platforms, bypassing traditional financial intermediaries such as banks. It typically covers consumer loans, small business loans, and sometimes real estate or project financing. Platforms facilitate the process, performing basic credit assessment, setting loan terms, and handling payments and servicing, while earning revenue from origination and servicing fees.

How it works: A borrower submits an application on a crowdlending platform and presents a loan listing. Lenders review listings and can fund all or part of a loan, enabling diversification across many small loans. The platform pools funds, originates the loan, and collects repayments with interest. Recovered payments are distributed to lenders after fees. Some platforms also offer secondary markets for selling loan portions.

Participants and products: The main participants are individual and institutional lenders and borrowers, which may include consumers seeking personal loans, small and medium-sized enterprises seeking growth capital, or real estate and project financing. Loan terms usually range from a few months to several years, with interest rates reflecting assessed risk. Some platforms offer specialized products or bundled portfolios to target different risk profiles.

Risks and regulation: Crowdlending involves credit risk and liquidity risk, and investors may lose part or all of their capital. Platform operational risk and potential fraud are also considerations. Regulation varies by country but often includes registration as a lending or investment marketplace, disclosure requirements, and consumer protection rules. Investor suitability and limits may apply, particularly for retail participants.

Impact and trends: Crowdlending can increase access to credit for borrowers and provide diversification opportunities for lenders. It competes with traditional banks and other fintech products, with growth tied to evolving regulation, credit analytics, and platform risk management.