P2P Lending on Steemit

@SteemFund has been a great learning experience so far. The main goal was to crowdfund projects with votes, at the beginning this was hard but with the decline in price and rewards it has now become impossible to raise significant amounts.

On our previous campaigns we have managed to raise up to 30 SBD with votes and have gather a few donations from witness sponsors. However, we have done little to contribute to the campaigns that usually require at least 500 SBD to finish their projects.

SteemFund as a lending platform

Thinking of ways to accomplish our initial goal I thought about the possibility of shifting from a crowdfund platform to a P2P intermediary.

In previous posts published under my account @chitty, I have pondered the idea of using Steemit reputation system as a way to boost investor’s confidence on borrowers:

“…the reputation system makes Steemit an ideal platform for p2p lending. Users who ask for money have more to lose, since they are putting their reputation at risk, you could even limit borrower´s account reputation so that only people with a certain reputation can ask for loans.” - Steemit as a p2p lending platform

How it could work

Borrowers will send their application similar to how they have been sending crowdfunding projects so far, stating what the loan would be used for, the time frame to repay it and number of installments.

@SteemFund would set a minimum reputation required to apply for a loan and a minimum Annual Interest Rate depending on the reputation of each user:

REP	Annual Direct Interest
70+	10%
65+	15%
60+	20%
55+	25%
50+	Cannot Apply for Loan

Loan Example

So let’s say I tested the system first and asked for a 1,000 Steem loan with my account @chitty that has 66 Rep. The loan Application could look something like this:

Overview	I would use this loan to short Steem. I believe price will keep declining so I should make enough profit to repay it in 3 months. If things go wrong, I have enough SP to repay the loan.
Amount of Loan in Steem	1,000
Annual Interest Rate	15%
Monthly installments	3
Total Interest during loan period	3.75%
Total Amount to repay	1,037.5%
Monthly payments	345.833 Steem

@SteemFund account would act as in intermediary, it will collect the borrower real name and address, this information would only be released if the borrower defaults.

@steemfund account would also collect payments and distribute them to all the investors.

Challenges

Because I do not have the money or the knowledge needed to make this an automated process, I would have to review each of the applications manually, I would also be handling payouts to investors. This could be quite time consuming. If steemfund becomes successful I would be looking for the help of a python programmer to build a payment script similar to the one @steemsports uses for payouts.

Since we would be managing community funds, I would prefer if I have a partner that we could all trust to give them active authority over this account or create a multi-sig account (not sure if possible yet).

Conclusion

SteemFund lending system would work like many others P2P lending platform, but it will have steemit reputation as an added security for investors. A borrower with high reputation is less likely to commit fraud since he would be risking potential future blogging rewards.

I would love to read your comments on the subject.

Regards,
@chitty