Peer-to-peer lending and its effects on small businesses is a topic that has gained traction in recent IELTS Writing Task 2 exams. This subject aligns with the growing interest in financial technology and alternative lending methods, making it a relevant and potentially frequent theme for future tests. Based on analyses of past IELTS questions, we can expect to see more prompts related to this topic, particularly focusing on the economic and social implications of peer-to-peer lending.
Let’s examine a typical IELTS Writing Task 2 question on this subject:
Some people believe that peer-to-peer lending platforms have a positive impact on small businesses, while others argue that they pose significant risks. Discuss both views and give your own opinion.
Analyzing the Question
This question requires candidates to:
- Discuss the positive impacts of peer-to-peer lending on small businesses
- Explore the potential risks associated with these platforms
- Provide a personal opinion on the overall impact
The key challenge is to present a balanced argument while clearly stating your stance on the issue.
Sample Essay 1 (Band 8-9)
Peer-to-peer lending platforms have revolutionized the financial landscape, particularly for small businesses seeking capital. While proponents argue that these platforms democratize access to funding, critics contend that they introduce new risks to the market. This essay will examine both perspectives before presenting my own view on the matter.
On the one hand, peer-to-peer lending offers significant advantages to small businesses. Firstly, it provides an alternative source of funding for entrepreneurs who may struggle to secure loans from traditional banks. This increased access to capital can stimulate innovation and economic growth by allowing more small businesses to launch or expand their operations. Additionally, peer-to-peer platforms often offer more competitive interest rates and flexible terms, benefiting borrowers who might otherwise face prohibitive costs.
However, critics argue that these platforms are not without risks. One primary concern is the potential for inadequate risk assessment, as peer-to-peer lenders may lack the sophisticated credit evaluation tools of established financial institutions. This could lead to higher default rates, jeopardizing both lenders’ investments and borrowers’ financial stability. Furthermore, the relative lack of regulation in this sector raises questions about consumer protection and the potential for fraudulent activities.
In my opinion, while peer-to-peer lending platforms do present certain risks, their potential to drive economic growth and innovation outweighs these concerns. The democratization of access to capital is crucial for fostering entrepreneurship and economic dynamism. However, I believe that a balanced approach is necessary. Implementing robust regulatory frameworks and improving risk assessment methodologies can mitigate many of the associated dangers while preserving the benefits of this innovative financing model.
In conclusion, peer-to-peer lending platforms offer a promising avenue for small business financing, despite the challenges they present. As this sector continues to evolve, it is crucial to strike a balance between encouraging innovation and ensuring adequate safeguards for all participants in the lending ecosystem.
(Word count: 332)
Essay Analysis
This essay demonstrates characteristics of a high band score (8-9) for the following reasons:
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Task Achievement: The essay fully addresses all parts of the task, presenting a well-developed response with relevant, extended, and supported ideas.
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Coherence and Cohesion: The essay is cohesive and logically organized, with clear progression throughout. Paragraphing is used effectively, and a range of cohesive devices are employed.
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Lexical Resource: A wide range of vocabulary is used with full flexibility and precision. The essay demonstrates sophisticated control of lexical features.
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Grammatical Range and Accuracy: A wide range of structures is used with full flexibility and accuracy. The essay shows consistent control of complex language.
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Balanced Argument: The essay presents both viewpoints clearly before offering a nuanced personal opinion.
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Relevant Examples: The essay provides specific examples to support each point, enhancing the overall argument.
How peer-to-peer lending changes banking is a topic that has gained significant attention in recent years, and this essay effectively captures the key aspects of this transformation.
Sample Essay 2 (Band 6-7)
Peer-to-peer lending platforms have become popular in recent years, and they have both positive and negative effects on small businesses. This essay will discuss both views and give my opinion.
On the positive side, peer-to-peer lending helps small businesses get loans more easily. Many small businesses find it hard to get loans from banks, but peer-to-peer platforms give them another option. This can help them start or grow their business when they couldn’t before. Also, the interest rates on these platforms can be lower than bank rates, which saves money for small businesses.
However, there are also risks with peer-to-peer lending. One problem is that the lenders might not check the borrowers carefully enough. This could lead to more people not paying back their loans, which is bad for both the lenders and the borrowers. Another issue is that these platforms are not regulated as much as banks, so there might be less protection for people using them.
In my opinion, I think peer-to-peer lending is mostly good for small businesses, but we need to be careful about the risks. It’s important to have more rules to protect people using these platforms. Also, the platforms should check borrowers more carefully to reduce the chance of loans not being repaid.
To conclude, peer-to-peer lending has both advantages and disadvantages for small businesses. While it provides more opportunities for funding, there are also risks that need to be managed. Overall, I believe it can be beneficial if used carefully and with proper regulations.
(Word count: 295)
Essay Analysis
This essay demonstrates characteristics of a Band 6-7 score for the following reasons:
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Task Achievement: The essay addresses all parts of the task, but some points are underdeveloped. The response is relevant, but some ideas lack extension and support.
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Coherence and Cohesion: The essay is generally well-organized, with clear overall progression. However, the use of cohesive devices is sometimes inaccurate or mechanical.
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Lexical Resource: A sufficient range of vocabulary is used for the task. There are some attempts at less common vocabulary, but with some inaccuracy.
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Grammatical Range and Accuracy: A mix of simple and complex sentence forms is used. There are some errors, but they do not impede communication.
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Balanced Argument: The essay presents both viewpoints, but the discussion lacks depth compared to the Band 8-9 essay.
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Examples: While some examples are provided, they are less specific and detailed than in the higher band essay.
The impact of peer-to-peer lending platforms on small businesses is clearly presented in this essay, albeit with less sophistication than the previous sample.
Key Vocabulary
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Peer-to-peer lending (noun) – /pɪər tə pɪər ˈlendɪŋ/ – A method of debt financing that enables individuals to borrow and lend money without an official financial institution as an intermediary.
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Democratize (verb) – /dɪˈmɒkrətaɪz/ – To make something available to all people.
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Prohibitive (adjective) – /prəˈhɪbɪtɪv/ – So expensive as to prevent people from buying or doing something.
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Fraudulent (adjective) – /ˈfrɔːdjʊlənt/ – Obtained, done by, or involving deception, especially criminal deception.
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Entrepreneurship (noun) – /ˌɒntrəprəˈnɜːʃɪp/ – The activity of setting up a business or businesses, taking on financial risks in the hope of profit.
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Regulatory framework (noun phrase) – /ˈreɡjʊlətəri ˈfreɪmwɜːk/ – A system of regulations and the means to enforce them, usually established by a government to regulate a specific activity.
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Mitigate (verb) – /ˈmɪtɪɡeɪt/ – Make (something bad) less severe, serious, or painful.
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Ecosystem (noun) – /ˈiːkəʊsɪstəm/ – A complex network or interconnected system.
In conclusion, the topic of peer-to-peer lending and its effects on small businesses is likely to remain relevant in future IELTS Writing Task 2 exams. Candidates should be prepared to discuss various aspects of this financial innovation, including its benefits, risks, and broader economic implications. To practice, try writing your own essay on this topic or related themes such as how financial technology affects rural banking. Share your essays in the comments section for feedback and further discussion.