Consider the following financing systems:

  1. Crowd funding
  2. Peer-to-Peer lending
  3. Invoice trading
  4. Shadow banking

 Which of the above are examples of alternative financing systems?

Answer: [A] 1, 2 & 3 Only

Alternative financing system is can be defined as financing from external sources other than banks or stock and bond markets. There exists direct connection of fundraisers with funders, generally over internet platforms, where lenders range from individual investors to non-bank lending companies. Peer-to Peer lending provides an online platform which enables debt financing or equity financing between lenders and borrowers without the use of an official financial institution such as banks or an intermediary. Invoice trading allows a business to sells its invoices at a discount to a pool of individual or institutional investors for cash. Crowd funding is the pooling of small amounts of money from many investors through internet platforms. Shadow banking system involves financial intermediaries in facilitating the creation of credit across the global financial system but whose members are not subject to regulatory oversight as it is unregulated activities by regulated institutions.

This question is a part of GKToday's Integrated IAS General Studies Module