Think of a number and multiply by eight
We haven’t had a good denominator post in a while, but I was struck by Stuff’s story on ‘social lending’. By next April, an NZ company hopes to be able to start up peer-to-peer lending here, after changes in the law, and we’re told
“This will be a way for individuals to play alongside the big institutions,” Milsom said
Just how that can happen – and the scale that is possible – is shown from what has happened in the UK, where the largest peer-to-peer lender has lent more than £330 million since it launched in 2005.
That’s an average of just over £40 million per year over 2005-2012, or about 66p per capita per year in the UK. On the same scale in New Zealand, that would come to perhaps $6 million per year in loans. The UK lender in question appears to be Zopa, and they make their money by charging a 1% borrowing fee and 1% lending fee. Under the same setup, $6 million per year in loans would mean $120 000 per year in income for an NZ equivalent, before paying any costs.
It’s certainty possible that peer-to-peer lending will take off, and it might not be long before it exceeds 1% of all unsecured consumer debt. But the idea makes more sense spun as ‘room for expansion’ not as ‘look at the scale in the UK’.
Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient See all posts by Thomas Lumley »