The growth of social lending

Declining trust in banks and the difficulty of obtaining credit in the current recession may prove a catalyst for some already growing trends, the use of mutual finance through credit unions and ‘social lending’.

The credit union movement has seen a significant growth in recent years, the number of members growing from 224,674 in 1997 to 607,400 in 2007, according to The Association for British Credit Unions Limitied (PDF). It is expected that numbers will be boosted further by the current crunch in commercial lending.

Social lending, by which people side-step banks to lend and borrow from each other via the internet is also taking off around the world. Zopa was created in the UK in 2005 and other countries have now followed suit: Prosper (USA), Boober (The Netherlands), Smava (Germany) and Maneo (Japan). Social lending is becoming so popular that Virgin Money now offers a managing process for friends and family to loan to each other.  

The worldwide value of social lending is now estimated to be about $26 trillion. Facilitated by new technologies and particularly the growth of online communities, and emerging as a response to a number of drivers including ethical consumerism, a rise in relatively well off people (see poverty and inequality), and more demanding and empowered consumers, I expect the value of social lending to continue to grow.

Last updated at 15:08 Mon 18/May/09.
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Katherine's picture


Specialist Editor

As I mentioned in my comment on Megan’s blog post I too think that the value of social lending will continue to grow.

Rohan and everyone at NESTA Connect offered some interesting events around this question earlier this year and the results of their work can be found on the webank website – recommended! I was particularly interested in how (as with many online social networks) there was a heavy debt to traditional models (see for example, the ROSCA-based Kubera): this seems again to be an example of online technologies facilitating a move away from institution-led systems to more personal and social models of [economic] interaction.

Natalie's picture


Third Sector Foresight

Anyone heard of Twollars? Well they're a new online 'currency of appreciation' that you can use on Twitter to reward positive actions. Each Twitter user automatically has 50 Twollars in their account. So they're great news for VCOs as people can give Twollars to the charity of your choice and once the charity has created an account, they can sell their Twollars to businesses and people who support their cause and want more Twollars. So, Twollars are designed to go back into circulation. I'm wondering if this is an example of a wider, growing trend where faced with a dwindling supply of and more expensive real currency in the recession, people are increasingly starting to trade in other items. This is after all how currency started with shells, gold pieces and the like. This might also link to people increasingly feeling that they want to participate in good causes and get more involved in their community in a time where many people are facing hard times, something which has happened in previous recessions. This may also extend to trading skills as shown by Time Banking UK. Sharing skills and time can be an important way of maintaining care and fostering mutual support in economies affected by the recession. So you go and read to a person who doesn't speak much English and they may cook a meal for an older person, who may in turn offer some gardening advice to another person, you basically just donate the time or the action.

This Young Foundation paper which we discussed on the site here explores some of the examples of alternative currencies already in use like LetsLink UK (see pages 25-26) where people exchange all kinds of goods and services with one another, without the need for money. Is anyone else using any alternative currencies for social or positive action or causes or heard of any groups doing this? What do you think it shows about our society and how we are adapting to the recession and how we might function in the future?

For more information about Twollars and how to donate them, see this FAQ page.

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