Social finance: bubble or set for mainstream?

In its weekly mail-out to lenders on Friday, Zopa, the social banking community, reported that a whooping £245,200 was lent out to borrowers in the previous seven days at an average gross rate of approximately 11 per cent. Gross because lenders need to deduct Zopa’s fees, bad debt and tax on any return.

The Financial Times and Sunday Times have lined up to report on the potential of micro-finance schemes operating outside the traditional banking system. Zopa is enabling consumers to raise debt at a time when retail loans have all but dried-up and offers lenders a greater return than almost any other form of investment.

The question is whether the current financial crisis has created a bubble for social lending schemes or whether they are set to go main stream?

Also posted on www.rainierpr.co.uk