The fifth UK Alternative Finance Industry Report by the Cambridge Centre for Alternative Finance (CCAF) found that P2P business lending had become an increasingly important part of financing for smaller businesses.
The report was conducted with support from the Peer-to-Peer Finance Association and the UK Crowdfunding Association and included responses from 75 platforms.
It found that P2P business lending was the largest market segment in online alternative finance with £2bn in transaction volume, up 65% on 2016.
Last year also saw further increases in the institutionalisation of funding across alternative finance models, with 40% of funding for P2P business lending being provided by institutional lenders, including mutual funds, pension funds, asset managers, banks, family offices and other financial institutions.
Meanwhile, in equity-based crowdfunding, 49% of the funding was provided by venture capital funds and professional investors co-investing with retail investors.
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In addition, the report found that real estate crowdfunding increased by more than 200% to £211m, while equity-based crowdfunding rose by 22% to £333m.
Reward-based crowdfunding decreased by £4m to £44m and donation-based crowdfunding only grew by 2.5% to £41m.
Bryan Zhang, executive director at CCAF, said: “This report reflects an industry that is playing an increasingly important role in helping consumers and businesses access finance, while growing to become more diversified, sophisticated and institutionalised.”
Rhydian Lewis, CEO and founder of RateSetter, said the Cambridge team had brought to life the ongoing growth and development of the P2P sector.
“This report illustrates how P2P lending is inching its way unstoppably to becoming a mainstream part of the financial system in the UK, opening up a huge, previously inaccessible pool of returns for everyday investors and a competitive alternative to bank finance for consumer and business borrowers.”