Before we get into the advantages of a sharing economy let us first understand what it means and how it works. The philosophy behind the sharing economy is very like a barter system. There is an exchange of products and services between individuals such that both parties benefit and obtain what they want – those who desire a specific product or service connect with those who offer that product or service. The product or service can be given in exchange for some other product or service or in exchange for money.
Unused or underused products
People who have unused or underused products can rent them out and turn them into a paying proposition, rather than have them lying around as liabilities. People with spare rooms in their house rent them out to travelers and holiday-makers – this concept has transformed into homestays and enterprises like “airbnb” and “stayzilla”.
People rent out cars and bicycles when they are not using these themselves. Others who have time on their hand can use the time to help out neighbours and others for a fee – they can offer their services to teach, do the gardening, run errands like shopping, walking the dog, driving old people or those who cannot drive, paying bills etc.
Spend much less
Those who use these products and services spend much less than they would have if they had rented them out from a professional enterprise. They also save money that they would have needed if they had bought the products. So both sides benefit in economic terms.
This idea is growing fairly fast across the world and it is expected to continue doing so as more and more people realize the benefits of converting unused liabilities to earning assets. In a sharing economy, everyone is a winner. Those who have something to offer make money in return for what they provide. Consumers get whatever they desire – that too at a lower rate and pretty quickly. This is also a very good use of local products and services.
Local informal finance institution
The sharing economy can also provide finances to locals for their needs. Setting up a local informal finance institution with funds from those local people who have a bit to spare can help with loans to the needy. This way loans are available more easily and there is minimal legalities and form-filling to avail of the loan. The procedure is simplified – the lender earns some interest and the borrower gets the money for his needs.
Business with very little seed capital
The sharing economy has given rise to numerous small time entrepreneurs, who have been able to start a business with very little seed capital. With time and effort they have been able to grow their business and make larger profits. This system also allows flexibility in working hours. Those who provide services can set their own working hours and have time for other interests too. This type of freelancing is very popular among the younger generation. The sharing economy also has tremendous social value. It allows people to connect with one another and helps build a sense of fellow-feeling, bonding and sharing.