Person-to-person guaranteeing - Revision history

wikademia>Eme at 23:57, 19 November 2010

2010-11-19T23:57:43Z

← Older revision		Revision as of 23:57, 19 November 2010
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	~~<!-- Please do not remove or change this AfD message until the issue is settled -->~~		'''Person-to-Person Guaranteeing''' (P2P Guaranteeing) is the process by which people are able to facilitate the lending process by providing the [[guarantee]] or [[Collateral_(finance)\|collateral]] for a [[loan]] to be taken out. In the case of a [[borrower]] in such a position that there is insufficient funds for even the loan collateral, banks will not lend because of the inherent riskiness associated with such a loan. Therefore, it would be necessary for the borrower to obtain the funds from outside sources. By engaging in P2P Guaranteeing a third party steps in and provides the necessary [[risk_capital\|risk capital]] by guaranteeing the loan, thereby reducing the bank's risk and enabling them to make a loan that they would not have otherwise made.
	~~{{AfDM\|page=Person-to-person guaranteeing\|logdate=2009 August 18\|substed=yes}}~~
	~~<!-- For administrator use only: {{oldafdfull\|page=Person-to-person guaranteeing\|date=18 August 2009\|result='''keep'''}} -->~~
	~~<!-- End of AfD message, feel free to edit beyond this point -->~~'''Person-to-Person Guaranteeing''' (P2P Guaranteeing) is the process by which people are able to facilitate the lending process by providing the [[guarantee]] or [[Collateral_(finance)\|collateral]] for a [[loan]] to be taken out. In the case of a [[borrower]] in such a position that there is insufficient funds for even the loan collateral, banks will not lend because of the inherent riskiness associated with such a loan. Therefore, it would be necessary for the borrower to obtain the funds from outside sources. By engaging in P2P Guaranteeing a third party steps in and provides the necessary [[risk_capital\|risk capital]] by guaranteeing the loan, thereby reducing the bank's risk and enabling them to make a loan that they would not have otherwise made.

	==Advantages==		==Advantages==

wikademia>Dr. Eme: 30 revisions

2009-08-26T17:22:19Z

30 revisions

← Older revision	Revision as of 17:22, 26 August 2009
(No difference)

wikademia>Hu12: afd and remove advert

2009-08-18T14:20:25Z

afd and remove advert

← Older revision		Revision as of 14:20, 18 August 2009
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	'''Person-to-Person Guaranteeing''' (P2P Guaranteeing) is the process by which people are able to facilitate the lending process by providing the [[guarantee]] or [[Collateral_(finance)\|collateral]] for a [[loan]] to be taken out. In the case of a [[borrower]] in such a position that there is insufficient funds for even the loan collateral, banks will not lend because of the inherent riskiness associated with such a loan. Therefore, it would be necessary for the borrower to obtain the funds from outside sources. By engaging in P2P Guaranteeing a third party steps in and provides the necessary [[risk_capital\|risk capital]] by guaranteeing the loan, thereby reducing the bank's risk and enabling them to make a loan that they would not have otherwise made.		<!-- Please do not remove or change this AfD message until the issue is settled -->
			{{AfDM\|page=Person-to-person guaranteeing\|logdate=2009 August 18\|substed=yes}}
			<!-- For administrator use only: {{oldafdfull\|page=Person-to-person guaranteeing\|date=18 August 2009\|result='''keep'''}} -->
			<!-- End of AfD message, feel free to edit beyond this point -->'''Person-to-Person Guaranteeing''' (P2P Guaranteeing) is the process by which people are able to facilitate the lending process by providing the [[guarantee]] or [[Collateral_(finance)\|collateral]] for a [[loan]] to be taken out. In the case of a [[borrower]] in such a position that there is insufficient funds for even the loan collateral, banks will not lend because of the inherent riskiness associated with such a loan. Therefore, it would be necessary for the borrower to obtain the funds from outside sources. By engaging in P2P Guaranteeing a third party steps in and provides the necessary [[risk_capital\|risk capital]] by guaranteeing the loan, thereby reducing the bank's risk and enabling them to make a loan that they would not have otherwise made.

	==Advantages==		==Advantages==
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	*In a July 2008 co-guarantee approval by USAID, a 10 year $48 million guarantee facility was set up to assist with the financial needs of "small and medium-sized enterprises" who are deemed "too small for corporate loans but have financing needs larger than what [[microfinance]] institutions can provide". <ref name="usaid" />		*In a July 2008 co-guarantee approval by USAID, a 10 year $48 million guarantee facility was set up to assist with the financial needs of "small and medium-sized enterprises" who are deemed "too small for corporate loans but have financing needs larger than what [[microfinance]] institutions can provide". <ref name="usaid" />

	~~==Pioneer==~~
	[[United_prosperity\|United Prosperity]], a California-based non profit is considered to be the world's first person-to-person loan guaranteeing website<ref>[http://www.alliancemagazine.org/node/2288 Alliance Magazine], World's first P2P loan guarantee website enters the field.</ref> in which individuals can provide a [[loan guarantee]] which secures a much larger loan for a selected [[entrepreneur]] living in [[extreme poverty]].

	==References==		==References==

67.59.53.123: /* Examples of Local, Social, and Financial Impacts */

2009-08-17T18:21:32Z

Examples of Local, Social, and Financial Impacts

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	*'''"The Demonstration Effect"''': By demonstrating the benefits of loan guarantees -- specifically [[sustainability]] and [[Profit_(accounting)\|profitability]] -- local financial institutions will likely follow suit and expand their market reach.<ref name="benefits" />		*'''"The Demonstration Effect"''': By demonstrating the benefits of loan guarantees -- specifically [[sustainability]] and [[Profit_(accounting)\|profitability]] -- local financial institutions will likely follow suit and expand their market reach.<ref name="benefits" />

	==Examples of ~~Local, Social, and Financial Impacts~~==		==Examples of P2P Guarantees==

	*A [[Memorandum of Understanding]] (MOU) was signed by [[USAID]] and [[Standard Chartered Bank]] aimed to support African economic growth. The october 2008 partnership hopes to enable things like increased trade throughout [[sub-Saharan Africa]] and to promote financial sector development among others.<ref name="usaid">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/index.html USAID], Development Credit Authority (DCA).</ref>		*A [[Memorandum of Understanding]] (MOU) was signed by [[USAID]] and [[Standard Chartered Bank]] aimed to support African economic growth. The october 2008 partnership hopes to enable things like increased trade throughout [[sub-Saharan Africa]] and to promote financial sector development among others.<ref name="usaid">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/index.html USAID], Development Credit Authority (DCA).</ref>

67.59.53.123: /* Advantages */

2009-08-17T18:16:21Z

Advantages

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	*'''Lower Foreign Exchange Rate Risk''': With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.		*'''Lower Foreign Exchange Rate Risk''': With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.

	'''Lower Interest Rates'''~~<br>~~		*'''Lower Interest Rates''': Guaranteeing a loan increases confidence that the loan will be repaid and it reduces the risk faced by the bank. As a result of reduced risk the cost to borrowing becomes less, which translates to a lower [[interest rate]] charged by the bank to the borrower.
	Guaranteeing a loan increases confidence that the loan will be repaid and it reduces the risk faced by the bank. As a result of reduced risk the cost to borrowing becomes less, which translates to a lower [[interest rate]] charged by the bank to the borrower.

	'''Promotion of Private-Sector Investment'''~~<br>~~		*'''Promotion of Private-Sector Investment''': Guarantees will encourage financial institutions to lend untapped capital since part of the risk is being covered.<ref name="benefits" />
	Guarantees will encourage financial institutions to lend untapped capital since part of the risk is being covered.<ref name="benefits" />

	'''Encouragement of Lending'''~~<br>~~		*'''Encouragement of Lending''': The risk is shared with the [[private-sector]], effectively reducing the overall level of risk and encouraging lending.<ref name="benefits" />
	The risk is shared with the [[private-sector]], effectively reducing the overall level of risk and encouraging lending.<ref name="benefits" />

	'''Increase of Banks' Lending Capacity'''~~<br>~~		*'''Increase of Banks' Lending Capacity''': Guarantees help [[bank\|banks]] make loans they would not have made otherwise, thereby allowing them to explore previously untapped markets and increasing their overall lending capacity.<ref name="benefits" />
	Guarantees help [[bank\|banks]] make loans they would not have made otherwise, thereby allowing them to explore previously untapped markets and increasing their overall lending capacity.<ref name="benefits" />

	'''"The Demonstration Effect"'''~~<br>~~		*'''"The Demonstration Effect"''': By demonstrating the benefits of loan guarantees -- specifically [[sustainability]] and [[Profit_(accounting)\|profitability]] -- local financial institutions will likely follow suit and expand their market reach.<ref name="benefits" />
	By demonstrating the benefits of loan guarantees -- specifically [[sustainability]] and [[Profit_(accounting)\|profitability]] -- local financial institutions will likely follow suit and expand their market reach.<ref name="benefits" />

	==Examples of Local, Social, and Financial Impacts==		==Examples of Local, Social, and Financial Impacts==

67.59.53.123: /* Advantages */

2009-08-17T18:15:36Z

Advantages

← Older revision		Revision as of 18:15, 17 August 2009
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	==Advantages==		==Advantages==
	*'''Maximizing Impact''':		*'''Maximizing Impact''': Through the use of local credit channels, one U.S. dollar can leverage up to 50 dollars in loans,<ref name="benefits">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/overview.html USAID], USAID's partial credit guarantees.</ref> the P2P Guaranteeing model has a doubling effect of sorts. The amount of [[Capital_(economics)\|capital]] required of person A in order for person B to obtain a loan is less than the full loan amount, as person A is only supplying the collateral to free up the loan rather than the loan itself. Therefore, a $100 loan might require $20 in guarantee capital (20% of the loan amount).
	Through the use of local credit channels, one U.S. dollar can leverage up to 50 dollars in loans,<ref name="benefits">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/overview.html USAID], USAID's partial credit guarantees.</ref> the P2P Guaranteeing model has a doubling effect of sorts. The amount of [[Capital_(economics)\|capital]] required of person A in order for person B to obtain a loan is less than the full loan amount, as person A is only supplying the collateral to free up the loan rather than the loan itself. Therefore, a $100 loan might require $20 in guarantee capital (20% of the loan amount).

	*'''Lower Foreign Exchange Rate Risk''':		*'''Lower Foreign Exchange Rate Risk''': With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.
	With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.

	'''Lower Interest Rates'''<br>		'''Lower Interest Rates'''<br>

67.59.53.123: /* Advantages */

2009-08-17T18:15:14Z

Advantages

← Older revision		Revision as of 18:15, 17 August 2009
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	==Advantages==		==Advantages==
	'''Maximizing Impact'''~~<br>~~		*'''Maximizing Impact''':
	Through the use of local credit channels, one U.S. dollar can leverage up to 50 dollars in loans,<ref name="benefits">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/overview.html USAID], USAID's partial credit guarantees.</ref> the P2P Guaranteeing model has a doubling effect of sorts. The amount of [[Capital_(economics)\|capital]] required of person A in order for person B to obtain a loan is less than the full loan amount, as person A is only supplying the collateral to free up the loan rather than the loan itself. Therefore, a $100 loan might require $20 in guarantee capital (20% of the loan amount).		Through the use of local credit channels, one U.S. dollar can leverage up to 50 dollars in loans,<ref name="benefits">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/overview.html USAID], USAID's partial credit guarantees.</ref> the P2P Guaranteeing model has a doubling effect of sorts. The amount of [[Capital_(economics)\|capital]] required of person A in order for person B to obtain a loan is less than the full loan amount, as person A is only supplying the collateral to free up the loan rather than the loan itself. Therefore, a $100 loan might require $20 in guarantee capital (20% of the loan amount).

	'''Lower Foreign Exchange Rate Risk'''~~<br>~~		*'''Lower Foreign Exchange Rate Risk''':
	With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.		With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.

67.59.53.123: /* Advantages */

2009-08-17T18:14:33Z

Advantages

67.59.53.123: /* Advantages */

2009-08-17T18:14:06Z

Advantages

← Older revision		Revision as of 18:14, 17 August 2009
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	==Advantages==		==Advantages==
	~~===~~Maximizing Impact~~===~~		'''Maximizing Impact'''
	Through the use of local credit channels, one U.S. dollar can leverage up to 50 dollars in loans,<ref name="benefits">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/overview.html USAID], USAID's partial credit guarantees.</ref> the P2P Guaranteeing model has a doubling effect of sorts. The amount of [[Capital_(economics)\|capital]] required of person A in order for person B to obtain a loan is less than the full loan amount, as person A is only supplying the collateral to free up the loan rather than the loan itself. Therefore, a $100 loan might require $20 in guarantee capital (20% of the loan amount).		Through the use of local credit channels, one U.S. dollar can leverage up to 50 dollars in loans,<ref name="benefits">[http://www.usaid.gov/our_work/economic_growth_and_trade/development_credit/overview.html USAID], USAID's partial credit guarantees.</ref> the P2P Guaranteeing model has a doubling effect of sorts. The amount of [[Capital_(economics)\|capital]] required of person A in order for person B to obtain a loan is less than the full loan amount, as person A is only supplying the collateral to free up the loan rather than the loan itself. Therefore, a $100 loan might require $20 in guarantee capital (20% of the loan amount).

	~~===~~Lower Foreign Exchange Rate Risk~~===~~		'''Lower Foreign Exchange Rate Risk'''
	With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.		With P2P guaranteeing transactions are done solely in the local currency, between the local bank and the borrower. Money does not exchange hands when one agrees to become a guarantor since a guarantee is only an agreement to take on debt should the borrower [[Default_(finance)\|default]]. The only time money crosses borders with P2P guaranteeing is in the event of a default. Therefore, the risk of loss associated with fluctuations in the [[Foreign exchange rate]] is greatly diminished.

	~~===~~Lower Interest Rates~~===~~		'''Lower Interest Rates'''
	Guaranteeing a loan increases confidence that the loan will be repaid and it reduces the risk faced by the bank. As a result of reduced risk the cost to borrowing becomes less, which translates to a lower [[interest rate]] charged by the bank to the borrower.		Guaranteeing a loan increases confidence that the loan will be repaid and it reduces the risk faced by the bank. As a result of reduced risk the cost to borrowing becomes less, which translates to a lower [[interest rate]] charged by the bank to the borrower.

	~~===~~Promotion of Private-Sector Investment~~===~~		'''Promotion of Private-Sector Investment'''
	Guarantees will encourage financial institutions to lend untapped capital since part of the risk is being covered.<ref name="benefits" />		Guarantees will encourage financial institutions to lend untapped capital since part of the risk is being covered.<ref name="benefits" />

	~~===~~Encouragement of Lending~~===~~		'''Encouragement of Lending'''
	The risk is shared with the [[private-sector]], effectively reducing the overall level of risk and encouraging lending.<ref name="benefits" />		The risk is shared with the [[private-sector]], effectively reducing the overall level of risk and encouraging lending.<ref name="benefits" />

	~~===~~Increase of Banks' Lending Capacity~~===~~		'''Increase of Banks' Lending Capacity'''
	Guarantees help [[bank\|banks]] make loans they would not have made otherwise, thereby allowing them to explore previously untapped markets and increasing their overall lending capacity.<ref name="benefits" />		Guarantees help [[bank\|banks]] make loans they would not have made otherwise, thereby allowing them to explore previously untapped markets and increasing their overall lending capacity.<ref name="benefits" />

	~~===~~"The Demonstration Effect"~~===~~		'''"The Demonstration Effect"'''
	By demonstrating the benefits of loan guarantees -- specifically [[sustainability]] and [[Profit_(accounting)\|profitability]] -- local financial institutions will likely follow suit and expand their market reach.<ref name="benefits" />		By demonstrating the benefits of loan guarantees -- specifically [[sustainability]] and [[Profit_(accounting)\|profitability]] -- local financial institutions will likely follow suit and expand their market reach.<ref name="benefits" />

wikademia>Kojit: /* Pioneer */

2009-08-14T20:46:59Z

Pioneer

← Older revision		Revision as of 20:46, 14 August 2009
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	==Pioneer==		==Pioneer==
	[[United_prosperity\|United Prosperity]], a California-based non profit is considered to be "the world's first person-to-person loan guaranteeing website".<ref>[http://www.alliancemagazine.org/node/2288 Alliance Magazine], World's first P2P loan guarantee website enters the field.</ref>		[[United_prosperity\|United Prosperity]], a California-based non profit is considered to be the world's first person-to-person loan guaranteeing website<ref>[http://www.alliancemagazine.org/node/2288 Alliance Magazine], World's first P2P loan guarantee website enters the field.</ref> in which individuals can provide a [[loan guarantee]] which secures a much larger loan for a selected [[entrepreneur]] living in [[extreme poverty]].


	==References==		==References==