People have lent each other more than US$100 million through Prosper.com since it launched in February of 2006 and the U.S. Web site has partnered with SBI Holdings to expand into Japan.

Peer-to-peer lending Web site Zopa has been operating in Britain since early 2005 and began offering its service in the United States this month.

Flamboyant British entrepreneur Sir Richard Branson bought CircleLending, a six-year-old U.S. Internet company that manages loans between friends and family members, and rechristened it Virgin Money.

Kiva, which arranges for people to make micro-loans to those trying to start businesses in poor countries, was honored this month with a US$100,000 grant from fast-growing on-demand computing company SalesForce.com.

"I think what is really attracting people is that a person can look at somebody's story and consider circumstances that a bank or institution might not," said Fiona Ramsey of California-based Kiva.

"There is value humans can place on a story that banks don't."

Prosper, Kiva, and Zopa feature pictures of aspiring borrowers, who explain why they want the cash.

Scans of Prosper and Zopa revealed reasons including paying off expensive credit card debt, expanding small businesses, remodeling homes, dealing with medical bills, and starting a "Christian and Clean Comedy Club."

"The excitement around peer-to-peer lending is about the ability to know and even choose who you are helping," a Zopa spokesman told AFP.

"You can personally make a difference in someone's life and work on your own financial future at the same time"

Interest rates for investors are higher than those at typical savings accounts or bank certificates of deposit.

Meanwhile, rates are bargains for borrowers in comparison to those at credit card companies or institutional lenders.

Peer-to-peer lending is a new-age version of an old-age practice of community members helping each other improve their lives or weather stormy times, according to Web site operators.

"Peer-to-peer lending has been going on for some time," Zopa said. "What is new is the ability of the Internet to make it easy to do that with people you don't already know."

Zopa feels U.S. investors are steering clear of risk so, in contrast to its London-based service, the firm guarantees lenders will get their money back.

Lenders at Zopa put their money into the equivalent of certificates of deposit, selecting borrowers they want to direct funds to and picking interest rates from pre-set ranges.Zopa banks on its borrower-screening savvy to minimize losses.

In Britain, where Zopa's service involves direct loans between people with lenders bearing the risk, the "bad debt" rate is so low it rounds down to zero.

Prosper, created by E-Loan founder Chris Larsen, lets lenders spread money among borrowers whose individual loans end up financed by an array of people.

Prosper charges borrowers a one to two percent closing fee and lenders pay the Web site from zero to one percent of the outstanding principle annually to maintain accounts.

If a Prosper borrower fails to pay back a loan the default is reported to credit agencies and eventually sold to collection agencies. The default rate on Prosper loans is a meager three percent.

Prosper lenders are shying away from debt in the subprime category and the number of borrowers considered prime is climbing, according to company spokeswoman Tiffany Fox.

"As credit is becoming tighter in the broader markets for even people with good credit, Prosper is becoming an attractive alternative," Fox told AFP.

"There is definitely the creation of a new asset class for lenders. Eventually, people will have real estate, bond, stock and their people-to-people portfolio."

Kiva's model is philanthropic, letting investors of modest means back entrepreneurs in the developing world with interest-free loans.

The San Francisco organization plans to offer nominal interest rates next year to attract more capital.

"Not all of us can afford to open a school in South Africa like Bill Gates can but they can afford to lend someone US$25," Ramsey said.

"There is something about knowing what your money is used for. Something magical happens in that person-to-person connection."

Kiva investors lend an average of US$100 in US$25 or US$50 increments. The typical Kiva loan is approximately US$600 and there are US$16.5 million in outstanding loans.

Virgin Money is sticking with the CircleLending model of managing loans between family members.

"When I first started out in the record business, and was struggling to get by, my Aunt Joyce was kind enough to give me a small loan," Branson wrote in a letter posted at the Virgin Money Web site.

"That loan kept the Virgin Records recording studio afloat. Many years, and many business ventures later, I still have her to thank. So, obviously, loans between family and friends are very close to my heart."