Returns of more than 1% a month are drawing finance professionals to peer-to-peer lending platforms such as Funding Societies, MoolahSense and Validus Capital. Are the returns sustainable? What are the risks?

SINGAPORE (Jan 29): Retired banker Patricia Howe was looking for somewhere to invest some cash three years ago, but found none of the usual options appealing. Deposit rates and bond yields were far too low for her liking. And, she was unwilling to invest more in stocks, given her relatively short time horizon.

“I was looking to purchase another property, so I needed to stay in cash. [To me], equities are for a longer-term play,” she says. That led her to look into peer-to-peer lending platforms, which essentially offer crowdfunded loans to companies. “Peer-to-peer platforms offer shorter play,” Howe says. For instance, working capital loans are usually less than 24 months, while invoice financing loans are repaid in as little as three months.

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