Lending Crowdfunding: Principles and Market Development

Crowdlending has emerged as the leading form of crowdfunding in terms of scope and scale. For lenders, it offers new investment opportunities, often offering better returns than some alternative investment channels, as well as opening to incorporate new small-scale investors that have not enjoyed such opportunities before. For borrowers, it offers new channels to access credit, often either offered at better terms or by including groups that have previously been marginalized and underserved by traditional credit service providers. In the current chapter we present the brief history of crowdlending, its diversity of models, the current state or the industry, as well as the underlying mechanisms and principles guiding platform operations including risk assessment and the matching of borrowers and lenders. The discussion is supported by a review of related research, while highlighting trajectories of industry development trends. The chapter concludes with suggestions for future research and insights for practitioners.