Government interference risks distorting UK P2P market, say lenders
The British Business Bank, a government body, has handed almost £200m to seven P2P lending platforms including Funding Circle, MarketInvoice, Zopa and RateSetter, four of the biggest groups in the market. But it has turned down more than 120 applications.
Daniel Rajkumar, of Rebuildingsociety, a Leeds-based P2P platform that was rejected, said intervention by the British Business Bank had made it harder for smaller players to compete. He was told his business lacked scale and management experience.
“The government is creating a monopolistic situation. They are helping the largest businesses when they could be powering our growth rate,” he said.
His business has lent £4m to 80 businesses, doubling in size in six months.
But the platform could not compete with the likes of Funding Circle assisted by government money, he said. “The same business would get funded at a lower rate on Funding Circle than it would on Rebuildingsociety,” said Mr Rajkumar.
The British Business Bank has given £40m to Funding Circle.
James Meekings, co-founder of Funding Circle, said the bank lent at the same rate as other individuals and institutions.
He said the government had already intervened in the lending market by making cheap funding available to banks via the Funding for Lending scheme and therefore had to help other providers. He admitted it was an advantage but added the priority was to build the marketplace as quickly as possible.
“We are not a lender. We are a technology platform. We are the London Stock Exchange of small business lending. We need liquidity. I can see a market of five players,” he said.
ThinCats, which deals in larger loans funded by rich individuals using tax-friendly structures, was also turned down by the British Business Bank. Kevin Caley, managing director, said he was told its model was not suitable.
The UK P2P industry raised more than £500m of new money in the first half of 2014, according to the industry body. The aggregate rate of flow of funds through P2P platforms doubled in that time.
Assetz, which specialises in property lending, is only 18 months old and has not yet applied to the British Business Bank. It expects to be lending £20m a month by early next year. “It’s very useful and practical what the government is doing to carve out an opening for new people in the banking sector,” said Stuart Law, chief executive.
The Department for Business, Innovation & Skills said: “Peer-to-peer lending is growing rapidly, but currently represents less than 1 per cent of the smaller business market. The UK is a world leader in this emerging sector, and the British Business Bank is playing a significant role in supporting its growth.”
- October 26, 2014