Iwoca calls on Chancellor Philip Hammond to fix “failing” Bank Referral Scheme

By Oliver Smith on Thursday 23 May 2019

Alternative Lending

Christoph Rieche alleges that the initiative isn't delivering "any meaningful impact".

Iwoca calls on Chancellor Philip Hammond to fix “failing” Bank Referral Scheme
Image source: Christoph Rieche/iwoca

In a punchy letter to Philip Hammond today, iwoca CEO and co-founder Christoph Rieche called on the Chancellor to act in order to fix the Bank Referral Scheme which he claims has not had “any meaningful impact”.

The Bank Referral Scheme (BRS) was first announced by the government in August 2014 and finally went live in November 2016 as a way of signposting small businesses rejected by banks for loans towards alternative lending platforms.

Rieche’s complaint today is that iwoca, which now lends more to small businesses than Santander and HSBC and finances over half of the businesses which come via the BRS, is disappointed with the paltry number of leads coming its way.

Just 902 businesses have been referred via the scheme, according to the latest figures which cover up to June 2018.

“I am writing to you today because one of the cornerstone initiatives designed to help make finance more available to small businesses is at risk of failure,” writes Rieche in a letter sent to the Treasury today.

“The Bank Referral Scheme has failed to deliver any meaningful impact.”

According to iwoca’s research, there are some 300,000 businesses who say they’re looking to apply for a collective £1bn in finance, but “were somehow discouraged to submit a complete application”.

In order to “fix” the BRS Rieche calls on the Chancellor to back his establishment of a task force of industry leaders and policymakers to review the schemes quarterly effectiveness and recommend solutions to “unlock its full potential”.

Some of the initial recommendations iwoca makes in its letter include a referral fee to incentivise banks to capture the demand from SMEs that fall outside their eligibility criteria and pass them on to the BRS.

Rieche also suggests that HMRC could use the BRS as a way of helping small businesses to smooth the payment of corporation tax via borrowing and repaying in instalments.

“The government has a huge opportunity to turn the BRS into the success it deserves to be, for the benefit of small businesses across the country, and thereby creating much needed economic growth.”

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