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Ireland’s Sovereign Fund to Invest in P2P lending?

Ireland’s sovereign development fund may start to finance SME loans through P2P platforms. This would be part of its strategy to expand credit to small and medium sized businesses.

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The €7.2bn Ireland Strategic Investment Fund (ISIF) indicated that it was considering providing capital to a vehicle, the Platform Investment Fund (PIF), that would invest in loans originated by the next generation lending platforms (NGPs). 

The request for proposal published by the National Treasury Management Agency (NTMA) said:

“Funding is expected to be provided for both working capital (including single and batch invoice and supply chain finance) and loans outstanding for more extended periods.”

The tender comes only a few months after Donal Murphy, the ISIF’s head of infrastructure and credit finance, told IPE a resurgent banking sector was seeing it rethink its approach to SME lending. 

He said:

“We’d either look at that transaction for a potential junior debt or equity role, if there’s an absence of that, or we’ll move on and look at a different transaction or sector.”

It is likely that the loans would be aimed at companies based in Ireland as that fits with ISIF’s mandate to see a return on its investments and boost the domestic economy

“The PIF (once established) will ultimately select the counterparty that will perform this function, and the PIF will be the counterparty to any applicable agreements and contractual arrangements,” it said.

Peer-to-peer activity has so far been slightly muted in Ireland. Back at the beginning of 2014 Simon Deane-Johns, co-founder of Zopa, predicted that we would see a surge in peer-to-business lending in Ireland over the next three years. He suggested that P2B lending in Ireland could expand by €100 million by 2017.

Mark Fielding, Chief Executive of the Irish Small and Medium Enterprises Association (ISME), commented on the impact of the sector:

“The likes of Linked and Grid will do a great service to the economy and to small businesses in particular because they’ve made it easier to get finance, with less hassle, less delays.”

One constraint on growth of this nascent market is a lack of clear regulation. One platform in Northern Ireland, CoFunder, has followed in the footsteps of Estonian lender Bondora by giving itself over to the regulatory oversight of the UK’s FCA. Grid Finance’s launch saw Chief Executive Derek Butler suggest that the platform would be closely adhering to best practice in the UK market. Mr. Butler is loudly calling for the Central Bank to provide the industry with a structural boost:

“We’re engaging actively with the Department of Finance, the Central Bank we know are putting in place a position paper, but really what we’re looking for the Central Bank to do is roll out a roadmap for a regulatory regime. We think that should happen in 2015.”

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