Alternative Financial Models

Peer-to-peer lending, social-network based credit, and micro-insurance create new opportunities for urban poor to gain financial stability.

Real World Application

Everyone is a donor or lender
New bottom–up financial infrastructures will leverage social accounting tools, reputation systems, and peer-to-peer connectivity creating access to credit, savings, and insurance for urban residents cut off from traditional institutions. Developing alternative funding strategies will become more important as education competes with health and disaster response for funds. Microfinance experiments will utilize social networks to secure loans in communities where traditional lending practices may not succeed, like those pioneered in developing countries by the Grameen Bank. Prosper Market models itself on eBay, matching prospective lenders with borrowers. Aggregation of microtransactions, such as those initiated with eScrip and School Pop, will become more sophisticated and targeted. Web-based fundraising taps the social networks of potential donors, such as Omidyar Network’s DonorsChoose that allows individuals to donate in-kind to schools.