The Internet-based market enables customers to borrow and lend money directly from and to other people.

Borrowers can apply for loans between C$1000 and C$25,000 for a term of up to three years by posting a request on the Web site's listing board. The request includes the amount they want to borrow, their credit score, the term of the loan and the top interest rate they are prepared to pay.

Lenders then bid on the loan requests, stating how much they will lend - between C$25 and C$25,000 - and the rate they will accept.

Once the loan listing ends, the bids asking for the lowest interest rates are combined into a single loan and IOU Central transfers funds from the lender's to the borrower's account. IOU Central then transfers payments from the borrower's account to the lenders' accounts every month until the loan is repaid.

"At its core, IOU Central empowers individuals to be their own banker by giving them a platform to lend money to whomever they want. It's no longer just your local bank that can earn interest on your deposited money," says Phil Marleau, CEO and founder, IOU Central. "It also gives borrowers an alternative source of funds at competitive rates with no lengthy procedures to go through as are currently required at many traditional financial institutions."

IOU Central claims it is the first P2P lending site to launch in Canada although a rival, CommunityLend, has said it will be ready for a beta launch in early 2008.

Meanwhile US outfit Prosper, which launched two years ago today, says it now has over 580,000 members and has seen more than $118 million in loans funded since it went live.

The daily average number of borrower listings on the site has shot up from 1575 in January 2007 to 2413 in January 2008, with an average loan size of $6848.

Recent research from consultancy Gartner suggests that P2P lending is set to become a real threat to traditional banks, with social banking platforms growing to control 10% of the worldwide market for retail lending and financial planning by 2010.