Man placing savings in piggy bank

Innovative Finance Isa could double peer-to-peer funding




The launch of the Innovative Finance Isa could unlock a huge amount of new funding for peer-to-peer lenders.

A debate at this week’s LendIt Europe Conference at the InterContinental O2 looked at the future of the small business finance market and the role marketplace lenders played within it.

The debate looked at the future for peer-to-peer platforms within the SME lending space and talk turned to how it could grow its market share.

Kevin Caley, founder and chairman of ThinCats, saw the launch of the Innovative Finance Isa as a real boost to the market.

“We are constrained at the moment by lack of funds in the market.

“As the Innovative Finance Isa comes in, I think that will more than double the amount of funding in the market within the next year or so.

“That will put strains on our industry, but it will also lower rates and it will mean we are very competitive.”

The Innovative Finance Isa was launched by the government on 6th April, but the majority of peer-to-peer firms are yet to be authorised.

However, Kevin added: “I think in five years’ time we may well have 20% of the small business market and I think the new development will be investment in social business where you can get tax relief.”

Nevertheless, according to Angus Sanders, head of UK strategy at Funding Circle, marketplace lending still had an absolutely tiny share of the SME market, but he was positive about the future.

“We have not really got to a point yet where we are directly competing in a really large-scale way with the banks and in fact we find a lot of areas of co-operation.

“Marketplace lending in 10 to 15 years’ time will be very much part of the eco-system.

“I think there will be partnerships with banks and it will be international.

“I think most companies will grow globally, there is a lot of cognitive scale you can have [by] going international.”

Jane Dumersque, chief executive officer of Folk2Folk, also hoped to see an increase in the size of the industry and hoped to collaborate with more institutional investors.

“I particularly look at some of the larger institutions like councils as much as anything else because I would like to see councils being forced in some ways to put some of their own investment back into the community.

“So rather than just lending their money out or investing their money, they actually re-invested into the local community and I think that is something we as platforms can very much help them to do.

“So let’s try and get some of the big money down into local businesses.”

Meanwhile, Stuart Law, chief executive of Assetz Capital, concluded that the lack of interest rate growth could really benefit marketplace lending.

“There is no real growth in the stock market and base rates haven’t got a hope of going up because without growth you can’t raise the rates.

“In the real world, interest rates aren’t going anywhere and that is going to support this industry massively as it will move power from traditional banks over to us because our cost of funding will be sensible.”

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