strong evidence for the democratization of lending practices in P2P loan auctions.
SAN FRANCISCO (PRWEB) July 15, 2008
June 2008 Prosper People-to-People Lending Market Survey
Prosper's People-to-People Lending Market Survey results are released the second Tuesday of every month. To register to automatically receive the survey, send an email with "SUBSCRIBE" in the subject line to: [email protected]
Market Commentary By Prosper Co-founder and Chief Executive Officer, Chris Larsen
In June, two very interesting independent academic studies were released. The first study by Economists Ginger Zhe Jin and Seth Freedman of the University of Maryland looks at Prosper's market since inception to determine average returns and other interesting conclusions about the market.
Another study led by Paul Dholakia at Rice University finds that decisions made by Prosper lenders are much less likely to be influenced by race or gender and "strong evidence for the democratization of lending practices in P2P loan auctions." The study also cites that bidders on Prosper:
[…] seem more rational (bid according to what is best for them financially) and less influenced by stereotypes (bid according to old notions and stigmas). This outcome is substantially different from the documented discriminatory practices of financial institutions (e.g., Ladd 1998; Munnell et al. 1996; Blanchflower, Levine, and Zimmerman 2003) […].1
As we have previously stated, one of our primary objectives in making Prosper market data fully transparent and freely available via an API is to allow and encourage anyone to study the Prosper market and consumer credit markets in general. We deeply appreciate the level of diligence and analysis so many have contributed using Prosper's marketplace data. We are also very encouraged that an increasing number of academics, economists and professional credit analysts have taken the time to conduct deep studies of the market and share their conclusions publicly.
Membership and Loan Volume Statistics
New Members 28,401 30,985 216,036 202,459 754,164 Funded Loans ($) $8.3 million $7.0 million $46.8 million $43.4 million $155.8 million Funded Loans (Units) 1,436 950 7,418 6,197 24,803 Average Loan Size $5,755 $7,389 $6,309 $7,004 $6,282 Daily Average Number of Borrower Listings 2,510 2,385 2,454 2,039 1,729 Mix of Funded Borrowers
Prime 43% 28% 42% 29% 34% Near Prime 52% 61% 53% 56% 54% Sub Prime 5% 10% 5% 15% 12% Estimated Annual Return on Prosper Select Index
June 2008 Prosper Select Index 7.22% Prime Select Index 8.04% Near Prime Select Index 6.38% Sub Prime Select Index 9.18% Average Borrower Rates on Prosper Select Loans
Prime Select Loans 9.38% 9.55% 10.09% 9.78% 9.96% 9.95% Near Prime Select Loans 16.53% 16.17% 17.17% 16.09% 15.47% 16.10% Sub Prime Select Loans 35% 22.37% 23.15% 27.36% 23.29% 24.21% Definitions
Since Inception: November 1, 2005 through June 30, 2008. Prosper's by invitation only "friends and family" launch began on November 1, 2005 and Prosper launched to the general public on February 13, 2006.
2008 Year-to-Date: January 1, 2008 through June 30, 2008.
2007 Year-to-Date: January 1, 2007 through June 30, 2007.
Prosper Select Index: The Prosper Select Index return is the estimated average annual return on principal, based on actual delinquency performance to date. The Prosper Select Index includes AA - E credit grade loans for borrowers whose credit reports at the time of application indicated zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less. The annual return period reflects loans originated in the twelve month period ending one month prior to the observation date of June 30, 2008. Prime Select includes AA and A credit grade loans (credit scores of 720+). Near Prime Select includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime Select includes E credit grade loans (credit scores between 560 and 599).
Average Borrower Rates: Average Borrower Rates are the weighted average borrower rates on Prosper Select Index loans with loan amounts between $5,000 and $10,000. Rates shown are interest rates, not annual percentage rates.
Mix of Funded Borrowers: Prime includes all AA and A credit grade loans (credit scores of 720+). Near Prime includes all B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes all E and HR credit grade loans (credit scores below 600).
Prosper, America's largest people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone. Prosper's membership consists of over 750,000 people from across the country. Since launching in February 2006, over $159 million in loans have been funded in the marketplace.
The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform. People who want to borrow on Prosper create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. People who register as Prosper lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. In addition to criteria commonly used by institutional lenders, such as credit data and histories, Prosper lenders can consider borrowers' personal stories, endorsements from friends, and group affiliations. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan to the borrower. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrowers and lenders.
Prosper was co-founded by Chris Larsen, co-founder of E-LOAN, and John Witchel, technology entrepreneur. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital, and Omidyar Network, Prosper has raised approximately $40 million. Prosper's marketplace platform is patent pending.
1 Rick L. Andrews, Utpal (Paul) Dholakia, Michal Herzenstein, Evgeny Lyandres (2008), "The Democratization of Personal Consumer Loans? Determinants of Success in Online Peer-to-Peer Loan Auctions," 31