Twelve thousand former students of the Polytechnic University of Valencia have already launched P2P lending and are offering loans to the thirty thousand current students of this university to help them cope with the significant increase in the price of university tuition fees. They will give them loans of up to 2,000 euros at an interest rate of 8% and a repayment period of one year.

As he explains Manuel del Pozoin Expansión, the formula is very simple. The student who needs the money enters the website of the UPV Alumni Association, where he or she has to explain how much money he or she needs and what for. Then the company Comunitae - the Spanish leader in P2P lending - comes into play, assesses the applicant's profile and offers to participate in the loan to the twelve thousand alumni. Then, it is not just one person who lends all the money to another - which would be a high risk for the saver - but many people lend money to many others, who, in turn, receive the total amount of their loan thanks to a multitude of small contributions.

Each P2P lending loan involves an average of 80 people, who can contribute anything from 50 euros to 1,000 euros to the total loan. In turn, each saver participates in as many loans as he or she wants. The Person-to-Person lending system is based on the rise of social networks on the Internet and the antipathy that big banks provoke among Internet users. In Spain, there are 20 million members of social networks (Facebook, Tuenti, Twitter or Linkedin), which is fertile ground for the development of these popular 2.0 banks.

Comunitae, which is the pioneer company, was founded in 2009 by Arturo Cervera, who came from the traditional banking world. It had very little success in its beginnings because, although the operation of this type of transaction is simple, it is very difficult to find Internet users who are willing to take the risk of lending money over the Internet. Especially in Spain, where there is a great deal of mistrust when it comes to financial transactions over the Internet.

Now, the situation is beginning to change because Comunitae has obtained the supervision of the Bank of Spain and the authorisation to intermediate loans without having to become a financial institution. This favoured the incorporation of well-known investors in the world of cyberspace to Comunitae's capital: Cabiedes & Partners (a venture capital fund that has invested in Internet companies such as Privalia, Bankimia or Habittisimo), Good Investments (another venture capital fund) and François Derbaix (founder of Toprural.com).

The result is that, in the first nine months of this year, Comunitae has brokered 119 loans worth 525,350 euros, which have meant a net return of 9.8% for savers. These figures are still very small because these are not good times for this type of loan due to the increase in default suffered by financial institutions. Risk management in these operations is fundamental, because if it is permissive, the situation experienced by the company Prosper in the United States can occur, which reached a default rate of 27%, three times more than that of Spanish banks.

To minimise these risks, Comunitae tries to turn its members into friends, and its managers say they carry out a rigorous evaluation of the credit applicant's profile. This year, Comunitae has received 1,651 loan applications, of which it has finally approved 119, or 7.2% of the applications.

Given the large number of financial scams that have taken place in Spain in recent years, it is very difficult for citizens to trust this type of cyberspace exchange. However, if P2P lending helps many young people to finance their university studies - as is going to happen in Valencia - then it is a good thing.

Diego Gutiérrez Zarza