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The Difference of P2P Lending Consumptive & P2P Lending Productive
Published on 30 Mar 2023
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The Difference of P2P Lending Consumptive & P2P Lending Productive
Fintech P2P has become a popular alternative financing option in recent years. In P2P lending, online platforms provide a means for Recipients of Funds and Investors to interact and apply for Funding or provide Funding with mutually agreed profit levels. There are two main types of P2P Lending: Consumptive and Productive. This article will discuss the differences between the two types of P2P lending.
Definition of Peer-to-Peer Lending Consumptive
P2P consumer lending is a type of P2P lending that offers to finance for consumption purposes, such as buying electronics, monthly shopping needs, or getting cash. Consumptive P2P lending offers profits that tend to be higher than productive P2P lending because the credit risk is higher. This is because Fund Recipients who use consumptive P2P lending usually only need personal identification data without including assets as collateral.
Definition of Peer-to-Peer Lending Productive
On the other hand, productive P2P lending provides financing for business needs, such as working capital funding or purchasing equipment. Productive P2P lending has risks that tend to be lower with benefits that are relatively dependent on the tenor, type of business, and nominal financing. Fund recipients who use productive P2P lending are usually small or medium business owners who want to run their projects but are constrained by capital.
Read More: 6 Benefits of Peer to Peer Financing for those of you who want to start investing
The Differences Between P2P Consumptive and P2P Productive
Total Funds obtained by P2P Consumptive & P2P Productive
Another difference between Consumptive and Productive P2P Lending is the number of funds that can be submitted. Consumptive P2P Lending tends to offer a smaller nominal value than productive P2P lending. This is because consumer borrowers usually need money on a smaller scale. On the other hand, productive P2P lending usually offers more significant amounts of money because business owners need more capital to grow their businesses.
Financing Duration of Consumptive P2P & Productive P2P
In addition, consumptive and productive P2P lending also differs in the duration of the financing. Consumptive P2P lending tends to offer a shorter financing period than productive P2P lending. This is because consumer financing is usually short-term, such as monthly needs or purchasing goods. On the other hand, productive P2P lending tends to offer a longer financing period because business owners need time to grow their businesses and turn a profit.
Level of Risks and Benefits of Consumptive P2P & Productive P2P
Finally, consumptive and productive P2P lending also differ in the profiles of interested investors. Investors interested in consumer P2P lending usually seek higher returns and are willing to take on higher risks. On the other hand, investors who are interested in productive P2P lending tend to prefer investments that are more stable and tend to have lower risks.
ETHIS is a Productive P2P for SME Financing
One example of Productive P2P is ETHIS. ETHIS connects Lenders and Fund Recipients to carry out projects with a Sharia Returns system. Small and Medium Enterprises (SMEs) can get funding facilities to develop their businesses and Lenders get potential Returns (Nisbah) starting from 1 million rupiahs.
Access the ethis.co.id & download the ETHIS Mobile application on the App Store or Play Store.
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PT. ETHIS FINTEK INDONESIA
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1. Tech-based Islamic Financing service (P2P Financing) is a civil agreement between Funder and Beneficiary, in which all risks are charged to all parties.
2. Payment failure is charged to the Funder, except for fraud case and mismanagement. Beneficiaries are imposed if fraud and mismanagement happens as in Risk Sharing terms based on Islamic Principles. There is no national institution or authority that is responsible to financing risk or payment failure or compensating on any parties including loss, failures, fees or consequences after.
3. The platform with agreement from all respective users (funders and/or beneficiaries) accesses, gains, stores, manages and/or uses users’ personal data (Data Utilization) on or in the objects, electronic devices (including smartphones or cellular phones), hardwares or softwares, electronic documents, applications or electronic systems belong to Users or managed by Users, upon the information of aims, limitations and mechanism of Data Utilization to the Users before the approvals.
4. Funders with limited knowledge on this financing are suggested not to use this service.
5. Beneficiaries are obliged to consider return rates/margin/service fee and other fees according to the ability to repay the financing.
6. Each fraud is recorded electronically in cyberspace and easily recognized by public through social media.
7. Users should read and understand this information before deciding to be a Funder or Beneficiary.
8. Government as in this case is Otoritas Jasa Keuangan (OJK) / Financial Services Authority is not responsible for violation or disobedience of users, Funder and Beneficiary (intentionally or unintentionally) against terms and conditions or agreement or attachment between the platform and Funder and/or Beneficiary.
9. Each transaction and financing activities, funding, financing or enforcement agreement regarding financing between or involves the Platform, Funder, Field Partner and/or Beneficiary should happen through escrow account and virtual account as stated in OJK regulation No. 77/POJK.01/2016 about Tech-Based Financing Services.
