I've taken time to read the replies in this thread and have been studying and researching all the points raised.

In summary, there are three key issues that need to be solved, namely

1) Collateral
2) Preventing fly by night actors
3) A means to collect the funds + interest

After watching a talk by Andreas M. Antonopoulos where he briefly mentioned the concept i'd like to add two additional issues :-

4) Minimizing individual/institutional risk
5) A simple yet secure method of verifying a debtor/creditor's identity

Borrowing from existing analogue systems, i'm hoping to get down to trying to come up with solutions to all the above. I already have some idea of how to perhaps approach some of the issues, but for the moment these thoughts have not yet formed into ideas i can articulate properly and explain.

If anyone is interested in tackling this problem, i'd be most grateful for any assistance/ input you can provide.

One thing that i do see posing issues (just one of the thoughts rattling in my mind ) is if it is somehow possible to do this without users having to submit their personal data to some centralized entity. If that is solved, maybe we'll see something materialize and we can write a paper on it.