The rise of P2P Finance model
An Overview of the Peer-to-Peer Finance Model
The Global Financial crisis of 2007–08 in the U.S changed the global financial landscape dramatically resulting in the disruption of the conventional models of finance. The rapid devaluation of financial instruments like mortgage-backed securities (MBS) & credit default swaps either precipitated the collapse of many financial institutions or they needed to be bailed out by their respective governments.
As lending dried out from the traditional financial channels caused by the extreme credit crunch, governments encouraged the emergence of new players & business models to provide alternative finance solutions to retail & institutional lenders. In the U.S the Jumpstart Our Business Startups (JOBS) Act legitimized the concept of Equity crowdfunding to a law — marking the birth of the era of distributed Peer-to-Peer finance model.
Many other countries followed in the footsteps of U.S. passing crowdfunding laws to stimulate innovation by allowing direct investments into early stage startups thus helping to bypass the sole reliance on Venture capital (VC) firms & high net worth individuals. According to a…
