Social P2P venture hindered by wholesale crackdown
- Marc Shoffman
- On April 18, 2017
THE FOUNDER of ThinCats has said that the regulator’s clampdown on wholesale lending will affect projects that can be funded through his social peer-to-peer lending platform Community Chest.
Kevin Caley (pictured) launched the social enterprise last year and it funded its first loan in February 2017 for £130,000. The debt facility went to a local Birmingham finance company called ART Business Loans, which supports West Midlands enterprises.
Investors could take advantage of five per cent community investment tax relief (CITR) – a government scheme that encourages investment in disadvantaged communities by giving tax breaks to investors who back local businesses and other enterprises.
But Caley says the Financial Conduct Authority (FCA)’s tighter restrictions on wholesale lending mean that loans like these will no longer be possible, as the money was lent to another lender.
Read more: FCA to push for global fintech framework
“You will be aware of the recent FCA letter to P2P platforms saying that lending to businesses that on-lend it are no longer allowed,” said Caley.
“The decision is a serious problem.
“We believe that the FCA were trying to stop certain practices on other P2P platforms and we have been caught unintentionally.”
The City watchdog wrote to the chief executives of all the platforms in February to highlight that if a lending business borrows through a P2P platform and lends that money to others, it may be “accepting deposits” without the correct regulatory permissions.
As a result, Community Chest will focus on projects that are eligible for social investment tax relief (SITR) instead.
“SITR applies to loans to normal trading businesses that also happen to have social benefits,” said Caley.
TagsCommunity Chest Financial Conduct Authority Kevin Caley p2p regulation P2P social venture ThinCats wholesale lending
Click here if you'd like to subscribe to our weekday e-newsletters, for all the latest P2P news by 7am. If you're interested in receiving a free copy of our monthly print edition, complete with exclusive content, please email us at firstname.lastname@example.org with your address.