Funding Circle co-founder James Meekings (pictured) has called on government to make his platform's loans Central Bank eligible.
Speaking as part of a panel of alternative finance specialists at this morning’s Treasury Select Committee meeting on SME finance, Meekings was asked by Simon Clarke MP whether he felt anything was missing from the existing regulatory framework for alternative finance firms.
In reply, Meekings said that he felt regulation was in “a good place” in terms of protecting the interests of consumers. But he added that more could be done to create a level playing field between banks and peer-to-peer lenders.
“So, for example, one of the things that we would like to see, and we’ve been working with the Bank of England on this, is for our investors to be able to sell their loans to the Bank of England – to make those loans Central Bank eligible,” he said. “Banks can do that, our investors can’t do that, and therefore that creates a distortion in liquidity across markets.”
In recent years, the Bank of England has attempted various "repo schemes" (including Funding for Lending (now the Term Funding Scheme) and the Discount Window Facility).
At present, funding taken by banks from these schemes cannot be used to fund loans via the Funding Circle marketplace, but Meekings' proposal is to change that. A Funding Circle representative said that such a move would allow banks to meet the funding schemes' criteria while stimulating the real economy. At the same time the move could make a huge amount of money available to the Funding Circle platform while significantly diversifying its capital base.
Meekings has a record of lobbying government through the medium of Select Committee meetings. In the summer of 2016, at one such meeting, he called on the British Business Bank to step up to support UK SMEs in the wake of Brexit. Six months later, the Bank had committed another £40m to be deployed via Funding Circle.
Crowdcube co-founder Luke Lang,Funding Xchange CEO Katrin Herrling and BGF boss Stephen Welton also gave evidence at the hearing, with Nicky Morgan MP acting as chair.
Lang at one stage highlighted the FCA’s planned post-implementation review, which he said is now over 18 months late. He also advocated the government taking a more active role in supporting the British public through “match-funding and crowdfunding”, in light of the reality that many entrepreneurs “need to be able to bring lead investment with them” when raising money via equity crowdfunding sites.
Herrling, who runs one of the government’s designated referral platforms, conceded that businesses that are declined funding by the banks are often “very, very difficult to fund”, adding that a large proportion of those coming through the referral process are very early stage businesses.
Welton praised the government’s EIS/SEIS scheme, but called for more support for British scale-ups. “If there is something that we want to try and focus on, it’s how do we take these successful start-ups which we are creating and turn them into successful international businesses,” he said.
