P2P sector praised for surviving Covid crisis
Industry stakeholders have heralded the peer-to-peer lending sector for surviving the Covid crisis with platforms reporting low levels of default while continuing to produce returns.
Speaking at the P2P Investing Summit, a virtual event hosted by Peer2Peer Finance News and AngelNews, Mike Carter, head of platform lending at the 36H Group, said the sector has performed well during the pandemic with most platforms coming out the other side while producing inflation-beating returns. He said those that collapsed have shown that they had effective wind-down plans.
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“I think the sector navigated it better than people expected,” he said.
“The first downturn for the sector was going to be tough and a seminal moment for any new investment class on how it reacts.
“Returns from loans did well, platforms slowed or paused lending and default rates were much lower than expected during a recession and we can see held up during the downturn. There were one or two difficulties, but most platforms came through the pandemic.
“It’s obviously always difficult to prove if wind-down plans are 100 per cent successful and you can’t ask to wind down to prove it but given some have been through that process it’s good to see what happened. It’s helpful they have worked. The implementation of Financial Conduct Authority rules has proven capable of being effective.”
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Jatin Ondhia, founder and chief executive of Shojin Property Partners, said during the pandemic platforms took the time as an opportunity to take a step back while investors froze but the market was soon back to being “very active”.
“I think generally the sector has done pretty well,” he said.
“It was a real test for a number of platforms. I think it’s really important to note the sector is really broad and different platforms invest in different areas. Naturally platforms investing in pubs may have suffered more but investing in our real estate projects continued.
“It’s a shame some platforms did fail or for various reasons did close, but it’s good to see wind-down plans did work and if you look at those that came out the other side, they came out much stronger.”
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Carter said that now there is plenty of P2P money that is ready to be invested in different platforms following lending through government-backed schemes that excluded retail lenders and RateSetter’s acquisition by Metro Bank and the sale of its loan book.
“A lot of P2P money hasn’t found a home and is looking at places to go,” he said.
“There is surplus funding yet to find a home.”