Both alternative financing models, microcredit and p2p lending, opened huge possibilities to support so-called “unbankables” on their way out of poverty, unemployment and social exclusion. How they work, what impact they have on the German start-up endeavour and which kind of obstacles still remain that they need to overcome will be investigated in the paper at hand.
Table of Contents
1 INTRODUCTION
1.1 Relevance of the Topic
1.2 Objectives and Structure of the Thesis
2 FUNDAMENTALS OF MICROCREDITS
2.1 Definition of Microcredits
2.2 Characteristics of Microcredits
2.2.1 Socio-Political Intentions
2.2.2 Credit Period and Redemption
2.2.3 Credit Risks and Collaterals
2.2.4 Developmental Types of the Supply of Microcredits
2.2.4.1 Upgrading
2.2.4.2 Downscaling
2.2.4.3 Greenfieldbanking
2.2.4.4 Linkage Banking
2.2.5 German History of Microcredits
3 FUNDAMENTALS OF PEER-TO-PEER LENDING
3.1 Definition of Peer-to-Peer Lending
3.2 Characteristics of P2P Lending
3.3 Models of P2P Lending
3.3.1 Direct and Indirect Lending
3.3.2 Secured and Unsecured Lending
3.3.3 Prior Relationship Lending
3.4 Exemplary P2P Lending Process
4 PARALLELS OF P2P LENDING AND MICROCREDITS
5 RELEVANT THEORIES OF ECONOMICS CONCERNING MICROCREDITS AND P2P LENDING
5.1 Law of Diminishing Marginal Returns
5.2 Transaction Cost Theory
5.3 Principal Agent Theory
5.3.1 Problems of the Principal-Agent-Relationship
5.3.1.1 Adverse Selection
5.3.1.2 Hold-Up Problem
5.3.1.3 Moral Hazard
5.3.2 Approach for Problems of the Principal-Agent-Relationship
5.3.2.1 Screening
5.3.2.2 Signaling
5.3.2.3 Monitoring
5.3.3 Summary of Findings for the Principal Agent Theory
6 FRAMEWORK FOR MICROCREDITS AND P2P LENDING IN GERMANY
6.1 Economic Factors and Labour Market
6.2 Current Start-Up Demeanour in Germany
6.2.1 Formations of Companies in Numbers and Structural Features
6.2.2 Characteristics of Start-Up Financing
6.3 Alternatives of Financing
6.4 Loan Programmes
6.4.1 Start-Up Grant of the Federal Employment Agency
6.4.2 Support for Recipients of Unemployment Benefit II – “Einstiegsgeld”
6.4.3 KfW Start-Up Loan
6.5 Legal Framework for Microcredits and P2P Lending Platforms
6.5.1 General Regulations for Microcredits
6.5.2 Legal Framework for P2P Lending
7 SUPPLY OF MICROCREDITS AND P2P IN GERMANY
7.1 Microcredit Supply
7.1.1 The “Mikrokreditfonds Deutschland” and Microfinance Institutions
7.1.2 The “Deutsche Mikrofinanz Institut”
7.1.3 The GLS-Bank
7.1.4 Summary of Loan Disbursement
7.2 P2P Lending Suppliers
7.2.1 Smava
7.2.2 Auxmoney
7.2.3 Online P2P Microcredit Model
8 DEMAND OF MICROCREDITS AND P2P LENDING IN GERMANY
8.1 Potential Volume of Demand
8.2 Borrower Characteristics
8.2.1 Start-Ups of Women
8.2.2 Start-Ups of Immigrants
8.2.3 Start-Ups out of Unemployment
8.3 Investors Characteristics
9. EVALUATION OF START-UP FINANCING THROUGH MICROCREDITS AND P2P LENDING PLATFORMS
9.1 Impact Assessment of the “Mikrokreditfonds Deutschland”
9.1.1 Evaluation of the Preferential Treatment of Target Groups
9.1.2 Evaluation of the “Mikrokreditfonds Deutschland”
9.1.2.1 The Expedience of Founders
9.1.2.2 The Expedience of Microfinance Institutions
9.1.2.3 The Expedience of the DMI
9.1.2.4 The Expedience of the GLS Bank
9.1.2.5 The Expedience of the “Mikrokreditfonds Deutschland”
9.2 Evaluation of the P2P Granting System
10 CONCLUSION AND OUTLOOK
Objectives and Topics
The thesis explores the potential of alternative financing models—specifically microcredits and peer-to-peer (P2P) lending—to support start-up financing in Germany. It investigates how these tools can address the credit gap for "unbankable" founders and how they interact with existing economic conditions and institutional frameworks.
- Fundamentals of microcredit and P2P lending structures.
- Theoretical underpinnings via New Institutional Economics (Transaction Cost Theory and Principal-Agent Theory).
- Comparative analysis of German microcredit supply and P2P platforms (e.g., Smava, Auxmoney).
- Evaluation of target group needs (women, immigrants, unemployed founders).
- Critical assessment of current government-backed microfinance initiatives.
Excerpt from the Book
3.1 Definition of Peer-to-Peer Lending
Peer-to-peer lending, henceforth p2p lending, is an often online-based form of transaction where borrowers place requests for loans while private lenders fund these by direct lending, meaning without the intermediation of a traditional financial institution like a bank. These online platforms are also known as person-to-person lending, peer-to-peer investing or social lending and operate mainly for profit. However, there are non-profit organisations, referred to as person-to-person charities or as crowd-funding projects, which connect donors and recipients of donations in almost the exact same way.
The rise of the Internet as the enabling technology behind those platforms gave these crowd-sourced business models the opportunity to gain ground. Recruiting platforms bring together employees and employers, auction portals connect sellers and buyers and in the same manner p2p lending platforms link borrowers with lenders like an eBay for loans. The pioneer of p2p online lending platforms has been “Zopa”, founded in 2005 in the United Kingdom. Since that day, more than 40 online lending websites started mainly in the United States of America and Continental Europe. At present, the total volume of p2p credits mediated by the biggest websites in the United States of America and Europe – Prosper, Lendingclub, Zopa, Smava and Auxmoney – approximately amounts to 600 million EUR. Compared to the volume of the traditional consumer credit market, p2p lending is still a niche product. Nevertheless, its occurrence raises significant attention of the general public, financial professionals and academics.
Summary of Chapters
1 INTRODUCTION: Outlines the motivation behind the research, specifically focusing on the financing gap for start-ups in Germany post-2008 and the potential role of alternative financing.
2 FUNDAMENTALS OF MICROCREDITS: Defines microcredits within global and European contexts, detailing various developmental supply types like Upgrading and Downscaling.
3 FUNDAMENTALS OF PEER-TO-PEER LENDING: Introduces P2P lending as a disintermediated financial model and explains the core mechanisms of platforms like Smava.
4 PARALLELS OF P2P LENDING AND MICROCREDITS: Examines commonalities between these two financing methods, particularly their shared target groups and information asymmetry challenges.
5 RELEVANT THEORIES OF ECONOMICS CONCERNING MICROCREDITS AND P2P LENDING: Provides a theoretical framework using Transaction Cost Theory and Principal-Agent Theory to explain market inefficiencies.
6 FRAMEWORK FOR MICROCREDITS AND P2P LENDING IN GERMANY: Details the economic environment and existing loan programs (e.g., KfW) relevant to German start-ups.
7 SUPPLY OF MICROCREDITS AND P2P IN GERMANY: Profiles the key actors in the German market, including the Mikrokreditfonds Deutschland and P2P providers like Smava and Auxmoney.
8 DEMAND OF MICROCREDITS AND P2P LENDING IN GERMANY: Analyzes the borrowing needs of specific groups such as women, immigrants, and the unemployed.
9. EVALUATION OF START-UP FINANCING THROUGH MICROCREDITS AND P2P LENDING PLATFORMS: Evaluates the efficiency and effectiveness of the existing microcredit system and the P2P granting process.
10 CONCLUSION AND OUTLOOK: Summarizes the findings and discusses future directions for improving financing support for German start-ups.
Keywords
Microcredits, P2P Lending, Start-up Financing, Germany, Financial Intermediation, Transaction Cost Theory, Principal-Agent Theory, Mikrokreditfonds Deutschland, Smava, Auxmoney, Social Inclusion, Information Asymmetry, Entrepreneurship, Small and Medium Enterprises, Credit Risk.
Frequently Asked Questions
What is the core focus of this bachelor thesis?
The thesis analyzes alternative financing tools, specifically microcredits and P2P lending, as potential solutions for the "unbankable" start-up segment in the German market.
What are the central thematic fields discussed?
The work covers theoretical economic concepts like information asymmetry, the practical landscape of microfinance institutions (MFIs) in Germany, and the operational differences between P2P platforms and traditional banks.
What is the primary research objective?
The objective is to evaluate how microcredits and P2P platforms can efficiently support German start-up financing and to identify the remaining obstacles these models face.
Which scientific methodology is applied?
The author utilizes a literature-based theoretical approach, combining economic theories (New Institutional Economics) with empirical data from industry reports, surveys, and comparative analysis of existing market models.
What topics are covered in the main section?
The main section spans from the history and definition of microfinance to a detailed evaluation of specific German institutions like the Mikrokreditfonds Deutschland, the GLS Bank, and private P2P platforms like Smava.
Which keywords best characterize the research?
Key terms include microcredits, P2P lending, start-up financing, financial intermediation, market failure, and information asymmetry.
How do P2P platforms like Smava mitigate risk without traditional collateral?
Smava employs mechanisms such as loan pools (for risk sharing) and utilizes SCHUFA-ratings and the KDF-indicator to assess borrower solvency, alongside potential social pressure within user groups.
Why is the "Mikrokreditfonds Deutschland" described as a potential "provocation" to German banks?
It is viewed as a provocation because the fund's existence implies that traditional saving banks, despite claiming to support many start-ups, were not sufficiently meeting the specific needs of the micro-credit target group.
- Quote paper
- Kathleen Kühnel (Author), 2011, Microcredits and peer-to-peer lending as financing tools for start-ups in Germany, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/177415
