Faircent.com, our P2P advisor, are our guest bloggers for this article and share the industry growth forecast and risk mitigation in place for investors.
The peer-to-peer, or P2P lending industry as it is commonly called, valued globally at $64 billion in 2015, has an annual compounded growth rate of 50%. The P2P model in India, kick-started in 2012, is now worth more than INR 250 Cr ($35 million).
RBI regulated the P2P industry in India in October 2017 and Faircent.com became the first platform in May 2018 to be receive the Certificate of Registration as an NBFC-P2P. Regulations protect interest of all stakeholders and have brought credibility to the sector. Even though the P2P industry in India is in its nascent stages, the market is poised to grow into a $5Bn behemoth by 2022, making it an extremely attractive mode of investment for potential investors.
The P2P lending model has established itself as a high ROI investment, protected from market volatility owing to its transparent model. This gives lenders control over where they decide to invest their money. But the benefits of P2P lending don’t stop there. The partnership between Cube Wealth and Faircent makes investing in P2P more simplified. Cube Members pick their investment risk category and Faircent sets up a customised P2P lending portfolio by matching borrowers that fit the profile. No need to vet the borrowers yourself, it is all done by Faircent for Cube Members.
The risk involved is much lower
P2P lending platforms have steps to mitigate risk for lenders:
legally binding agreements
collection of security cheques before disbursement
limiting lender investment to 20% of total borrower requirement
The RBI has now passed a mandate which limits the amount an investor can lend to a single borrower through any P2P lending channel at Rs. 50,000.
Defaulting is always a possibility. To mitigate this risk, a lender needs to build a diversified portfolio. A diversified portfolio means spreading small loan amounts across a large number of borrowers from varied profiles. This includes different occupation, gender, location, and risk buckets. It helps spread risk so that the default of one borrower account has a smaller impact on the investor’s entire portfolio.
When investing in P2P via Cube Wealth, a diversified portfolio created on behalf of the investor based on the risk category they select. It’s all part of the Cube Wealth service. For example, a Rs. 50,000 investment will be spread across 30–50 individual loans on behalf of the investor for the most simplified P2P experience available.
The return on investment is several points higher
Faircent.com has provisions for background checks through physical verification at home and office. It uses tech-driven credit evaluation to understand a borrowers’ ability to repay the loan. Accordingly, they are assigned various risk buckets with interest rates starting from 9.99% to 60% p.a. Cube Wealth targets P2P loans ranging 12% to 28% for members. P2P lending models provide higher returns than other traditional short term investment options such as a bank Fixed Deposit. Currently, the majority of lenders on Faircent.com are earning gross returns upwards of 20% p.a.
Control over where you’re investing the money
Faircent’s partnership with Cube Wealth means that investors don’t have to go through a borrower’s profile before investing. Instead, an investor in Cube simply picks the risk category they are comfortable with and Faircent takes care of everything else. Faircent uses their algorithm-driven systems to only provision funds to borrowers that meet the investors risk criteria. This makes investment through P2P lending via Cube Wealth much more efficient and less time-consuming.
1.P2P is a well regulated industry with RBI safeguards in place to protect all parties as the industry is set for strong growth.
2. P2P is a high-return stable investment opportunity.
3.You can be part of it and have a simple experience with Cube Wealth and investing in P2P.
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