Online or Offline? The Rise of "Peer-to-Peer" Lending in Microfinance

Over the past five years, "peer-to-peer" lending websites have become a new approach to mobilizing funds for on-lending to impoverished people in developing countries (microfincmce) and domestic markets. In this paper; the authors review these developments and use the analytical lens of asymmetric information and transactions costs to explain the characteristics of the different models in operation. The authors . find that 'Peer-to-peer" lending is more of an aspiration than a reality. Although web 2.0 technologies have offered new means of mobilizing funds, the borrowing mechanisms at work follow mainstream conventional approaches to the management of lending.