UK alternative finance market swells 35% in 2017

By Daniel Lanyon on Friday 23 November 2018

Editor's PickAlternative Lending

The latest report from the Cambridge Centre for Alternative Finance says peer-to-peer business lending became an increasingly important part of small business financing.

The UK online alternative finance market volume grew by 35 percent in 2017, to £6.2bn (from £4.6 bn in 2016), as peer-to-peer business lending became an increasingly important part of overall financing of smaller British businesses, according to research by Cambridge University.

Across 2017 the market for alternative finance saw growing institutionalisation of funding across models. On the lending side, 40 per cent (up from 28 per cent in 2016) of funding for P2P business lending was provided by institutional lenders including mutual funds, pension funds, asset managers, banks, family offices and other financial institutions.

In the 5th iteration of the UK Alternative Finance Industry Report by the Cambridge Centre for Alternative Finance, P2P lending to SMEs retained the top spot as the largest area of online alternative finance, with £2bn in transaction volumes in 2017, a 65 per cent year-on-year growth.

This suggests, the report’s authors state, P2P business lending was estimated to be equivalent of 29.2 per cent of all new bank loans to small businesses in 2017 – nearly double the 15.3 per cent figure in 2016.

“P2P Business Lending is becoming an increasingly important contributor to overall SME financing in the UK,” the report says.

Consumer lending via the P2P model stood at £1.4bn in 2017, followed by P2P property lending at £1.2bn and invoice trading at £787m.

The report also found that equity crowdfunding grew by 22 per cent year-on-year to reach £333m, but debt-based securities stayed constant at £79m.

Real estate crowdfunding increased by more than 200 per cent to £211m.Bryan Zhang, the executive director of the Cambridge Centre for Alternative Finance said: “This report reflects an industry that is playing an increasingly important role in helping consumers and businesses access finance, whilst growing to become more diversified, sophisticated and institutionalised.”

Rhydian Lewis, RateSetter CEO and founder, said: “The Cambridge team have once again brought to life the ongoing growth and development of the peer-to-peer sector. This report illustrates how peer-to-peer lending is inching its way unstoppably to becoming a mainstream part of the financial system in the UK, opening up a huge, previously inaccessible pool of returns for everyday investors and a competitive alternative to bank finance for consumer and business borrowers.”

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