April 17, 2024

Peer-to-peer financial system is a chain reaction kind of financial institution found mostly in the Western Africa region specifically Nigeria. This institution was founded to oust the high-interest rate demands from banks, so people of similar interests agree on a fixed amount of money to be contributed every day, week or monthly and after each circle the money is given to a member of the group.

People of the same interest or goal come together to create a system consisting of 1-infinite dependent on the agreed number by the people involved to achieve a common goal

Benefits of the peer-to-peer financial system

The peer-to-peer financial system though is filled with so much uncertainty that can arise from the selfish human nature.

  • Viable support system. The peer-to-peer financial system acts as a viable support mechanism for startups in the business field, people can easily access financial support without passing through the hullabaloo of the banks
  • Lesser or no interest: the peer system takes away the outrageous costs of financing a loan from the banking sectors
  • No collateral needed: the systems as well does not require collateral for the excess payment
  • Easy to pay back: the process of repayment is not burdensome as payments are made periodically
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Challenges of the peer-to-peer financial system

The peer-to-peer financial system is not free from challenges just like banks

*lack of consistency A major issue facing this system is the ability of some members to keep up with payments after accessing such funds and that turns into a challenge for other members of the group

* Death when a member dies the chances of recovery of such loans are often time lower and that can lead to a higher risk or dissolution of the meeting

*Lack of governmental control: lack of government control in the peer-peer financial system is a major problem as many tend to leverage this lacuna to defraud others.

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In conclusion, the peer-peer financial system is an invention of necessity to help ameliorate the financial constraints suffered by many SMEs/startups due to the lack of proper governmental funding/grants. If you find this article on the peer-peer financial system helpful leave us a comment.

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