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Why the recent criticism of P2P lenders is misplaced – Assetz Capital

by: Damien Druce, director at Assetz Capital
  • 20/11/2018
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Why the recent criticism of P2P lenders is misplaced – Assetz Capital
Today’s peer-to-peer (P2P) lending industry was forged in the fires of the 2008 recession. The crash once again showed that much of the financial system is not sustainable when the economy turns.


Banks stopped lending and it was the businesses, entrepreneurs and consumers who suffered.

Peer-to-peer lending – and other forms of alternative finance and direct lending – stepped in to help fill that vacuum.

But while it may have been shaped by the recession, peer-to-peer lending is not new.

It’s the simplest and oldest form of lending where people lend to other people through a loan management specialist – a practice that goes back many thousands of years.

It’s certainly far less complex than modern banking.

And we know that when executed properly it works incredibly well, benefitting all parties.

Investors can earn healthy interest and businesses can access finance – giving the whole economy a boost.

Since 2013 we’ve lent £660m to UK businesses, while our investors have earned £57m of interest.

We firmly believe that alternative and specialist lending is an incredibly important driver of economic growth and should be protected and nurtured.


Appropriate polices in place

With this in mind, it’s become increasingly frustrating to read other types of specialist and alternative lenders pouring scorn on the peer-to-peer market.

We felt it important to speak out in defence of the peer-to-peer market.

The critics claim that the entire peer-to-peer sector is responsible for high-risk – or even toxic – lending versus the rest of the alternative finance sector.

This incorrect differentiation is a naïve misunderstanding of the overall market.

In reality, all alternative lenders – and the banks themselves – each have their own credit policies and target customers and either have appropriate credit policies and processes for that segment or they don’t. That is the true differentiation.

Bad practice isn’t linked to what type of lender you are. The reality is, how you fund your loans is a moot point.

It’s the experience of your credit teams and the quality of your sanctioning processes that make the difference.

It doesn’t matter if you’re a peer-to-peer lender, a bridging company or a high-street bank.


End to us vs them

Yes – there are rogue and poor-quality operators, but these exist across the board in every single lending sub-sector.

And peer-to-peer will be under closer regulatory scrutiny than most due to its retail funding roots and that can only be a good thing for the long term.

We have around 100 people in our team now and they have individual lending and credit experience of as much as 40 years – so I’d suggest we are perhaps at one end of the quality spectrum among alternative and peer-to-peer lenders.

There are also many smaller companies with great skills too, and some companies of all sizes that do not.

We felt the need to defend peer-to-peer lending from the wild allegations circulating as a result of a few ‘bad apples’ that people are fearful to name and instead decide to slate a whole industry for a few cheap headlines.

It is sad that some are pushing an ‘us and them’ narrative. We want that to end.


Duty to maintain standards

The reduced appetite by mainstream banks has been addressed by alternative and specialist lenders and collectively we have played a key role in providing borrowers with access to finance and helping to support the economy.

We all have a duty to maintain the best lending standards we can, and with an eye to the cycle at all times.

We should be proud of the evolution and diversity of the specialist and alternative lending market and its support for UK plc.

Let’s stop the bickering and instead start working together to achieve better overall lending standards, call out poor operators that threaten our industry’s reputation and be proud of all of our huge achievements over the last ten years as we have collectively replaced the waning appetite of banks to support our country’s future.



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