For those who'd rather not borrow from friends, families, or strangers, there's Lending Club, a Sunnyvale, Calif., firm, launched in May in cooperation with the popular social networking site Facebook. Lending Club, which says it has already issued over $100,000 in loans, leverages Facebook's affinity groups. These groups, formed by millions of Facebook users, are built around shared interests -- attending the same college, for instance, or working at the same corporation.
Lending Club borrowers are put through a credit check. But they're also ranked according to their membership in Facebook groups. Lenders who belong to a Facebook group get a listing of creditworthy borrowers who belong to the same group.
John Donovan, Lending Club's chief operating officer, said group loyalty will ensure that borrowers repay the money. Besides, he said, lenders will feel more comfortable investing money with fellow Facebook group members. "It just goes back to the way it was a thousand years ago, when you lived in a certain village," said Donovan. "You know from experience whether you can trust a person in that village or not."
Having trouble finding capital for a new small business? You could approach other members of the Burgh Diaspora who have the means to help you make your dream come true. Like venture capital, trust paves the way for transaction.
Financial institutions have endeavored to develop metrics that allow them to measure risk without the benefit of local knowledge. As microlending has demonstrated, all the number crunching pales in comparison to a neighborhood network. Thus the 20-minute rule for Silicon Valley venture capital. In the faceless environment of the internet, heritage and shared experience can overcome the problems of distance.