INTRODUCTION

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 INTRODUCTION

Online peer-to-peer lending (online P2P lending) provides online users

an innovative loaning and investment pattern without the intermediation of
traditional financial institutions [1]. Primarily targeted at low and micro amount
loans, Online P2P lending was not only fund small scaled businesses but also
provide short term financial liquidity [2]. Since 2005, online P2P lending has
increased in many countries around the world such as United States, United
Kingdom, Canada, Japan, China and Italy. Lending Club, the world’s largest
online P2P platform, reported the total loan issuance gradually increases from
2009 to 2016, where the total loan issuance in 2016 were about 24 billion
dollars as shown in figure 1. Similarly, Transparency Market Research suggests
that the opportunity in the global online P2P market will be worth $897.85
billion by the year 2024, from $26.16 billion in 2015. It is believed that the
market is going to rise at a remarkable compound annual growth rate of 48.2%
between 2016 and 2024. Meanwhile the data shows that those small and
medium sized companies in the developing economies are longing for the loans,
and this trend will lead to the great development of P2P lending market in Asia
Pacific area.
The financial sector is not immune from the advent of online industry
and its potential impact. For this reason, it is attracting attention of analysts,
investors, customers, businesses and regulators in a major way. Peer-to-Peer
(P2P) lending is one such business model that has gathered momentum globally
and is taking roots in India. Although nascent in India and not significant in
value yet, the potential benefits that P2P lending promises to various
stakeholders (to the borrowers, lenders, agencies etc.) and its associated risks to
the financial system are too important to be ignored. The Reserve Bank (the
Bank) has therefore found it necessary to put out this discussion paper to elicit
public opinion and views of the various stakeholders on the future course of

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action having regard to the current legal and regulatory framework in place to
regulate the business of financial intermediation.

This paper basically attempts to assess the various business models that
are operational both domestically and internationally and the legal framework
within which these institutions operate. Further, international regulatory
practices on crowd funding and P2P lending available in public domain were
also examined to get an understanding of the regulatory approaches adopted by
different jurisdictions.

The “Consultation Paper on Crowdfunding in India” issued by SEBI on

June 17, 2014, was taken into consideration so as to avoid overlap of
jurisdiction. The paper had examined Security Based Crowdfunding framework
in India within the existing legal framework. In summary, it suggested that
under Security Based Crowd funding, the possible routes that could be explored
are the following:

 Equity based Crowd Funding (EbC) – raising equity through a crowd

funding platform.
 Debt based Crowd Funding (DbC) – raising of funds by issuing
debentures or debt securities through a crowd funding platform
 Fund based Crowd Funding (FbC) – raising of funds for pooling under
an Alternative Investment Fund (AIF) through a crowd funding
platform.

Suggestions/Recommendations made in the present consultation

paper pertain exclusively to lending through P2P platforms.

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 COMPANY PROFILE

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 COMPANY PROFILE

Peer-to-peer lending, also abbreviated as P2P lending, is the practice

of lending money to individuals or businesses through online services that
match lenders with borrowers. Since peer-to-peer lending companies offering
these services generally operate online, they can run with lower overhead and
provide the service more cheaply than traditional financial institutions. As a
result, lenders can earn higher returns compared to savings
and investment products offered by banks, while borrowers can borrow money
at lower interest rates, even after the P2P lending company has taken a fee for
providing the match-making platform and credit checking the borrower. There
is the risk of the borrower defaulting on the loans taken out from peer-lending
websites.

Also known as crowdlending, many peer-to-peer loans are unsecured personal

loans, though some of the largest amounts are lent to businesses. Secured loans
are sometimes offered by using luxury assets such as jewelry, watches, vintage
cars, fine art, buildings, aircraft and other business assets as collateral. They are
made to an individual, company or charity. Other forms of peer-to-peer lending
include student loans, commercial and real estate loans, payday loans, as well as
secured business loans, leasing, and factoring.

The interest rates can be set by lenders who compete for the lowest rate
on the reverse auction model or fixed by the intermediary company on the basis
of an analysis of the borrower's credit. The lender's investment in the loan is not
normally protected by any government guarantee. On some services, lenders
mitigate the risk of bad debt by choosing which borrowers to lend to, and
mitigate total risk by diversifying their investments among different borrowers.
Other models involve the P2P lending company maintaining a separate, ring
fenced fund, such as Rate Setter's Provision Fund, which pays lenders back in

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the event the borrower defaults, but the value of such provision funds for
lenders is subject to debate.

The lending intermediaries are for-profit businesses; they generate

revenue by collecting a one-time fee on funded loans from borrowers and by
assessing a loan servicing fee to investors (tax-disadvantaged in the UK vs
charging borrowers) or borrowers (either a fixed amount annually or a
percentage of the loan amount). Compared to stock markets, peer-to-peer
lending tends to have both less volatility and less liquidity.

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 PROBLEM DEFINITION

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 PROBLEM DEFINITION

The main purpose of this project is to study the “A Study on Awareness

and Perception of Peer to Peer lending in Nagpur.”
The main purpose of the study is to understand How to Invest in Market
for small scale in Micro Level Promoter for a Startup of any Kind of Business.

If any Small Scale & Micro Level Business not started properly due
to lack of Investment, most of the investment company provide investment in
any Business or any Micro level Business want to invest in any Investment
Company are not Profitable investment due to Intermediate take a higher
charges for Investment and also charge a higher interest for a return such
investment because of this the Margin of profit reduce and the Budget of a
Small Scale Business become higher, the Risk factor are always remain constant
in any stage of Business.

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 OBJECTIVES OF THE STUDY

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 OBJECTIVES OF THE STUDY

Peer to Peer lending provides some significant advantages to both

borrowers and lenders Higher returns to the investors: P2p lending generally
provides higher returns to the investors relative to other types of Investments.
This may be caused by the low credit rating of caused by the low credit rating of
the borrower or typical purpose of the loan.

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 HYPOTHESIS

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 HYPOTHESIS

Online P2P lending also known as person-to-person, peer-to-peer

investing or social lending that is consists of individual money lending to other
individuals or business through online services, without the intermediation of a
traditional finance institution such as banks [5]. Johnson, Ashta, and Assadi [2]
defined that “online P2P lending has primarily targeted small and micro loans,
which not only fund small businesses but also provide short-term financial
liquidity”. In summary, online P2P lending is the individuals lending money via
online services that the lenders and borrowers usually do not know each other
without through a traditional finance institution.

a. There is a significant difference in lender’s trusting borrower between

male borrowers and female borrowers.
b. There is a significant difference in lender’s trust in borrower between
borrowers who have proximity with lenders and those do not have
proximity with lenders. Lender characteristics Hypothesis
c. There is a significant difference in lender’s trust in borrower between
male lenders and female lenders.
d. There is a significant difference in lender’s trust in borrower between
four different spans of lender’s age.
e. There is a significant difference in lender’s trust in borrower between six
different lender’s incomes.

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 SCOPE OF THE STUDY

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 SCOPE OF THE STUDY

Scope of Peer to Peer Lending in India. India is the second fastest

growing economic hub in the world. Millennies today, as young as 21 years are
focusing on living their means are limited. In order to meet these needs, people
are looking out for money being available at their disposal almost instantly for
which they are resorting to newer avenues of finance like Peer to Peer Lending
in India.
In the recent years, Peer to Peer lending platforms also known as Non-
Banking Financial Companies (NBFC-P2P as per RBI directive 2017) are
setting a new trend. With the advancements in digital technology, P2P Lending
is made hassle free and less tedious. The main advantage of P2P borrowing is
that the loan processing is done through a complete online technology-based
process.
Above mentioned RBI regulations are expected to impact the P2P
lending space as follows:

The P2P market is estimated to grow to around $4-5 billion by 2020.

A major chunk of the currently understand market will be covered under the
financial umbrella, all thanks to P2P platforms.
People that are currently opting for banks to fulfill their financial needs, would
migrate tp P2P loan application processes are very efficient. This very trend
has been spotted in countries like UK and the US where P2P lending platforms
have become more preferable over banks.
For the lenders on these P2P platforms, the returns are very lucrative which
will continue to be the case along with more checks and processes introduced
by P2P platforms in order to keep NPAs in check.

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 RESEARCH METHODOLOGY

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 RESEARCH METHODOLOGY

Respondents of this study were collected from Thai people who always
use Internet banking, online transaction or had experience with using online P2P
lending during August to October 2017. All 312 responses were collected. After
screened out invalid responses, a total of 234 response were obtained for using
analysis. The demographic information of respondents is summarized in Table
1. To ensure content validity of measures, this study adapted from previous
researches in context of online P2P lending and e-commerce. Meanwhile, pilot
testwas tested for reliability and Kaiser-MayerOlkin(KMO) and Bartlett's test to
ensure the appropriateness of the research instrument. Pilot test collected 50
respondents for testing instrument. The reliability was evaluated by calculating
Cronbach’s alpha. All of Cronbach’s alpha of this study are greater than 0.7,
suggesting acceptable reliability (Hair et al., 1998). KaiserMeyer-Olkin(KMO)
test is a measure of sampling adequacy for each variable. The KMO varies
between 0 and 1

If a value close to 1, the patterns of correlations are relatively compact.

Accepting values are greater than 0.5 as acceptable (Kaiser, 1974). Moreover,
values between 0.5 and 0.7 are mediocre. Values between 0.7 and 0.8 are good.
Values between 0.8 and 0.9 are great. Values greater than 0.9 are superb
(Hutcheson, Sofroniou, 1999). The values of this study are greater than 0.5,
suggesting acceptable. This study was mainly divided into two parts. First,
demographic information will create to collect demographic data. This part will
identify personal characteristics including gender, age, income, education
background and online banking or online transaction experience. Secondly, this
study develops an online experiment by utilizing two heterogeneous borrower
samples to collect data and test hypotheses. All of samples are defined as loan

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amount request 100,000 baht, credit rating above average, annual interest rate
5% and loan maturity 1 year. The experiment of this study was mixed 2 gender
of borrower (male, female) x 2 occupation of borrower (government officer,
non-government officer) x 2 loan purposes of borrower (for develop business or
work, for private), while controlling for age of borrower as shown in Appendix.
The questionnaires were adapted from previous researches such
asSinghapakdi[24], Chen, Lai, and Lin [9], Lee & Turban [25] and anchored
with a 5-point Likert scales.

Table 1 Demographic information of Respondents

Frequency Percent
Gender Male 78 33.33
Female 156 66.7
Age 25-35 40 17.1
36-45 30 12.8
46-55 70 29.9
56-65 73 31.2
More than 65 21 90
Education High School or Below 5 21
Bachelor Degree 125 53.4
Master Degree 97 41.5
Doctor Degree 7 3
Income Less than 20000 20 8.5
20000-40000 97 41.5
40000-60000 75 32.1
60000-80000 16 6.8
80000-100000 14 6
More than 100000 12 5.1
Frequency Less than 1 time 69 29.5
1-5 times 43 18.4
6-10 times 29 12.4
11-15 times 22 9.4
16-20 times 15 6.4

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 DATA ANALYSIS & INTERPRETATION

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 DATA ANALYSIS & INTERPRETATION

1) Have you aware about short term credit ?

Aware Percentage
Yes 60
No 40
Total 100

40

Yes
No

60

INTERPRETATION

From the above graph it is clear that the 60% Peoples aware the Short
term credit and 40% not aware the short term credit.

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2) If yes, what were the sources of sources of short term credit?

Opinion Percentage
Bank-CC, OD 30
Seller 20
Credit Card 20
Hand loan from friends & relatives 30
Total 100%

30 30 Bank - CC, OD

Seller

Credit Card

Hand loan from Friends &

Relatives

20 20

INTERPRETATION

From the above graph it is clear that the 30% Source of Short term
credit in Bank CC, OD, 20% Seller and Credit Card and 30% are Hand
Loan from Friends & Relatives.

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3) Rate the following Criteria for availing loan for Short term?

Opinion Percentage
Flexibility 30
Rate of Interest 40
Legal Formalities 30
Total 100%

30 30

Flexibility
Rate of Interest
Legal Formalities

40

INTERPRETATION

From the above graph it is clear that the 30% Flexibility of availing
loan for short Term, 40% rate of Interest in Short Term and 30% Legal
formalities in availing loan.

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4) Have you ever heard about P2P lending?

Aware Percentage
Yes 60
No 40
Total 100

40

Yes
No

60

INTERPRETATION

From the above graph it is clear that the 60% Peoples aware the Heard
about P2P Leanding and 40% Not Heard about P2P Leanding

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5) Have you ever visited following website?

Opinion Percentage
Google 30
Wikipedia 30
peertopeerleanding 40
Total 100%

30

40 Google
wikipedia
Peertopeerleanding

30

INTERPRETATION

From the above graph it is clear that the 30% peoples visit the google
site, 30% peoples visit Wikipedia and 40% Peoples visit the site in Peer to
Peer leanding site.

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6) Would you like to pay interest for short term borrowing?

Aware Percentage
Yes 40
No 60
Total 100

40

Yes
No

60

INTERPRETATION

From the above graph it is clear that the 40% like to pay interest for short
term borrowing and 60% not like to pay interest for short term borrowing.

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What interest will you be willing to pay for short term loan?

a) Less than 1%
b) 1-2%
c) 2-3%
d) More than 3%

Opinion Percentage
Less than 1% 30
1–2% 30
More than 3% 40
Total 100%
e)

30

40
Less than 1%
1-2%
More than 3%

30

INTERPRETATION
From the above graph it is clear that the 30% interest will be
willing to pay form short term in Less than 1% and 1 – 2% loan,
40% are More than 3%.

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 CONCLUSION

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 CONCLUSION

This study examines the impact of characteristics of borrower

and lender on lender’s trust in borrower on online P2P lending decision.
Previous studies were mainly focusing on factors that influence on
lenders or borrowers, such as herding behavior, information asymmetry,
lenders’ perspective, characteristics of borrower. This research extends
prior studies in trust by including characteristics of lenders and
borrowers. The result confirms that gender of lender and occupation of
borrower are related to lender’s trust. However, this study does not
support the impact of borrower’s gender, proximity, lender’s age and
lender’s income on lender’s trust in borrower. It is possible that gender
and proximity does lay more importance on individuals’ trust, but
occupation is related to possibility and ability of repayment loan on the
borrower. Future research may be focuson other factors which
influencing on lender’s trust in borrower or lending decision. The result
of this study can be applied as a guideline for borrowers who need online
P2P lending.In particular, Thailand will approve online P2P lending
shortly.More understanding of the differences and similarities in personal
characteristics of the people from various countries is useful for people
who plan to be involved in or invest in the online P2P lending business.

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 SUGGESTION

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 SUGGESTION

This study examined the factors affecting lender’s trust in

borrower in online P2P lending. The results suggest that some
characteristics of borrower and lender affect trust of lender in borrower.
In the characteristics of borrower, we found that occupation of borrower
had a significant impact on lender’s trust in borrower. This result is
consistent with finding ofJeet al. [4] also found that occupation was
related to loan success. Besides, the result also shows that lenders trust
borrowers who are government officer more than borrowers who
nongovernment officer. However, we discovered that gender of borrower
and proximity with lender had not a significant impact on lender’s trust in
borrower. This finding is inconsistent with prior researches, which found
lenders favor borrowers who are socially proximate to themselves [4],
[23]. Similarly, Ravina [26] found gender does not have a statistically
significant effect on the likelihood of getting a loan. In addition, this
study found the significant relationship between lender gender and trust
in borrower. Result shows the impact of gender on trust in borrower by
male lenders more trust in borrower than female lender. This is consistent
with previous research such as Ravina [26]who found that gender affects
lending decisions. Herzensteinet al. [20] foundgender do affect likelihood
of funding success. Conversely, age and income of lender were not
influencing trust in borrower. The results of this study demonstrated no
significant relationship between both age and income of lender and
lender’s trust in borrower. According to the literature, there are a few
prior studies that reviews relationship between characteristics of lender
and trust in borrower. Those researches emphasized on the effect of
demographic characteristics of borrowers on lenders’

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Format Sample Age Gender Occupation Loss purpose
MGD 4 32 M Dentist To buy medical equipment
MGP 9 35 M Solider To buy new car
MPD 3 30 M Free lance To open coffee shop
MPP 10 38 M Sales person To repair the housing
FGD 16 32 F Teacher For study master degree
To buy new computer and
FGP 6 30 F Solider accessories
FPD 8 28 F Sales person For study master degree
Private
FPP 11 37 F business TO buy new car

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 BIBLIOGRAPHY

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 BIBLIOGRAPHY

Reference :-

[1] Chen, Dongyu, Hao Lou, and Craig Van Slyke. "Toward an understanding of
online lending intentions: Evidence from a survey in China." CAIS 36 (2015):
17.

[2] Johnson, Susan, Arvind Ashta, and DjamchidAssadi. "Online or Offline?:

The Rise of “Peer-to-Peer” Lending in Microfinance." Journal of Electronic
Commerce in Organizations (JECO) 8.3 (2010): 26-37.

[3] Komarova Loureiro, Yuliya, and Laura Gonzalez. "Competition against

common sense: Insights on peer-to-peer lending as a tool to allay financial
exclusion." International Journal of Bank Marketing 33.5 (2015): 605-623.

[4] Galak, Jeff, Deborah Small, and Andrew T. Stephen. "Microfinance decision
making: A field study of prosocial lending." Journal of Marketing Research
48.SPL (2011): S130-S137.

[5] Serrano-Cinca, Carlos, Begoña Gutiérrez-Nieto, and Luz López-Palacios.

"Determinants of default in P2P lending." PloS one 10.10 (2015): e0139427.

[6] Rotter, Julian B. "A new scale for the measurement of interpersonal trust."
Journal of personality 35.4 (1967): 651-665.

[7] Mayer, Roger C., James H. Davis, and F. David Schoorman. "An integrative
model of organizational trust." Academy of management review 20.3 (1995):
709-734.

[8] Kim, Dan J., Donald L. Ferrin, and H. Raghav Rao. "A trust-based
consumer decision-making model in electronic commerce: The role of trust,
perceived risk, and their antecedents." Decision support systems 44.2 (2008):
544-564.

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Web Sites :-

 www.google.com

 www.wikipedia.com

 www.peertopeerlending.com

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 ANNEXURE

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 ANNEXURE

1. Have you aware about short term credit ?

a) Yes
b) No

2. If yes, what were the sources of sources of short term credit?

a) Bank –CC,OD
b) Seller
c) Credit Card
d) Hand loan from friends & relatives

3. Rate the following Criteria for availing loan for Short term?
a) Flexibility
b) Rate of Interest
c) Legal Formalities

4. Have you ever heard about P2P lending?

a) Yes
b) No

5. Have you ever visited following website?

a) www.google.com
b) www.wikipedia .com
c) www.peertopeerlending.com

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6. Would you like to pay interest for short term borrowing?
a) Yes
b) No

7. What interest will you be willing to pay for short term loan?
f) Less than 1%
g) 1-2%
h) 2-3%
i) More than 3%

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