Crowd Funding and Peer to Peer Lending Solutions for the Pacific islands – An alternative financing for PNG and the Pacific

By NIGEL KAUA | REVIEW

Alternative finance is growing globally. Alternative types of funding, most notably peer-to-peer lending (P2P lending) and crowd funding, have grown significantly over the past 5 years during a period where banks were widely criticized for not lending enough to small businesses.

In 2015, £2.8 billion of finance was originated through these platforms in the UK alone1, helping cement online marketplaces as part of the financial mainstream.

Papua New Guinea and the Pacific islands also have the same challenges. The risks of lending to small business outweigh the benefits and so banks shy away from it. Pacifund the Pacific's first alternative funding platform.

Sourcing finance from the crowd

P2P lending and crowd funding share one common principle: raising finance online from a number of people, or investors, who pool together.

The crucial difference between crowd funding and P2P lending, or marketplace lending as it is increasingly known, is how to repay your investors.

What is Crowd Funding?

Crowdfunding is a method of raising finance which is typically suited to startups or early stage businesses, as you’re not required to make regular repayments like you would with a bank loan. Instead, you can give away equity in your business or donate the final product.

The majority of crowdfunding platforms in the UK involve selling ownership in your business, known as equity-based crowdfunding. Some global crowdfunding websites operate a rewards-based scheme, where in exchange for a contribution; you give your investors the finished product you’re making.

What is P2P Lending?

P2P business lending is a fast and accessible way of getting a cash injection into your business. The essential difference between P2P lending and crowdfunding is that you do not give away any equity, but rather pay interest on the money you borrow — much like you would with a bank loan.

P2P loans are thought to be better suited to established businesses who can service their monthly loan repayments. 

This service will be rolled out in 2019 in Papua New Guinea, The Solomon Islands, Fiji and Vanuatu. Its official site link is here, PACIFUND – Via Garamut News.