19th May 2016
The week has seen a fair bit of coverage for the peer to peer (P2P) lending market, as it affects businesses. The various P2P funders provide real alternatives to businesses whilst also offering investors the chance to earn higher returns than available from conventional deposit taking sources.
The spotlight has fallen this week on the UK P2P market following what may euphamistically be called ‘issues’ at the US’s largest P2P funder, LendingClub. The UK market has been quick to respond citing a different, although not complete, regulatory environment in which they work.
The Alternative Finance Data provider (www.altfi.com) shows spectacular growth since 2006 when P2P lending was zero to now when the figure exceeds £6.8 billion. The size of the market is such that any issues that affect the market must be taken seriously. (Its also interesting to realise that the overall figure represents over £6.8bn of funding not provided by traditional lenders.)
Growth in P2P funding very much reflects a low Base Rate environment and if and when rates rise the impact on this market will be interesting.
Back in February the P2P market attracted the following comment from former City regulator Adair Turner, “the losses which will emerge from peer-to-peer lending over the next five to 10 years will make the worst bankers look like lending geniuses”.
Only time will tell whether this hugely experienced and respected individual is proved to be right but care must be taken when looking at P2P, whether as a borrower or as an investor. With regard to the latter I have seen one P2P business quoting possible returns in excess of 15% and the phrase ‘if it sounds too good to be true etc etc’ comes to mind. If in doubt, seek independent, experienced, advice.
And so onto the highlight of the week, 5.30pm tomorrow, revenge for 1990.