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In October 2007 ebay launched Microplace, a peer-to-peer (P2P) online lending platform regulated by the Securities Exchange Commission (SEC), the US equivalent to the FSA*.  Unlike at Kiva  (see my last post on Kiva), Microplace lenders can earn interest of between 1% and 4% on each loan… the mantra of the site was (when I first looked at it) ‘earn financial returns while having a positive impact’.  This has been since been distilled down to ‘Invest wisely.  End poverty.’  They make it sound so easy!

Microplace’s model varies from Kiva’s in one other, very significant, way: It securitises the debt before selling it on to the investor, meaning that risk is diversified.  This difference in business model comes across very clearly in the branding; at Kiva you really feel like you are connecting with an entrepreneur, whereas at Microplace you feel like you are making an interesting and innovative investment, but not necessarily a ‘human’ one.  Less of a fuzzy feeling, more of a financial return… will this always be the way?

*P2P lending sites are going through tough times at the moment, with US based companies Prosper and Loanio falling foul of SEC rules.  The problem is that these companies didn’t register as companies that sell investment products, but tried to get away with being unregulated matchmakers.  However, since ‘the intention for lending [on these sites] is to expect a certain rate or return’, the SEC categorises Prosper and Loanio loans as an investment, meaning that both sites must register with the commission before they can resume operations (another US P2P lending site, Lending Club, has done this successfully).  Microplace is already registered with the SEC and Kiva, given that it doesn’t ‘do’ interest, is exempt.  Phew.

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