P2P partnerships with councils set to rise
Peer-to-peer lending platforms have been partnering with councils for a few years now and more deals continue to be struck.
Abundance, Folk2Folk and Rebuildingsociety have all partnered with local councils in recent years. In each case, the council is able to fund deals in their community whilst also earning an interest.
This is more attractive than seeking bank loans that would require the council to repay interest.
Local authorities can easily select which deals to fund on a P2P platform, and only fund those that meet their own criteria, for example, any environmental, social and governance standards they keep.
Abundance works slightly differently, offering municipal investments to councils that investors can fund, for example finance for projects to improve air quality, work towards zero carbon recycling or to install electric vehicle charging points and add solar panels to public buildings.
Overall, platforms benefit from additional funding and councils from this finance being pumped into their local community.
“I think it does show councils recognise the efficiency that P2P lending platforms can bring in delivering financial support,” Daniel Rajkumar, managing director of Rebuildingsociety, told Peer2Peer Finance News.
“They don’t need to worry about the cost of setting up a fund and doing credit risk and overseeing the management that they can entrust on a lean platform.”
Folk2Folk onboarded two councils as institutional investors, Cheltenham Borough Council in 2019 and welcomed another unnamed council last year.
In November, Islington Council became the latest local authority to launch a community municipal investment (CMI) product on Abundance after over 800 Abundance investors channelled more than £2m into projects with West Berkshire Council and Warrington Borough Council. Peer2Peer Finance News understands the platform plans to launch two more municipal investment over the coming months.
Rebuildingsociety is the most recent platform to partner with a council, after securing a funding agreement with Basildon Borough Council last month. The platform plans to partner with more local councils this year.
Clearly a trend is emerging as councils recognise the benefit of joining forces with UK-based P2P lending platforms, opening up a new world of financing in the future.
“It’s a smart, efficient and symbiotic way to provide practical support for local businesses while also helping the local council to grow its own funding pot,” a spokesperson from Folk2Folk said.
“Additionally, some investments via platforms like Folk2Folk may have positive environmental or social impacts and having this type of positive investment impact has become increasingly important to councils.”