ABUNDANCE can start lending out the £20m that retail investors have already put into its Innovative Finance ISA (IFISA) from tomorrow, after new rules come into effect that allow crowdfunded debt securities in the tax-free wrapper.
The peer-to-peer finance platform, which only makes ethical investments, has offered the IFISA since 6 April, but only as a cash holding that pays two per cent interest.
Abundance is expecting an additional £15m to be put into the tax-free product by Christmas.
However, the company currently has no projects available to lend to. It has two renewable energy projects in the pipeline, according to its website, as well as £12,240.65 of debentures available to buy in already-funded projects from other Abundance investors.
The company has said that new projects will be offered on the Abundance platform from November onwards.
Once the money is deployed, investors can expect returns ranging between six and nine per cent.
“IFISAs will help bring social investing into the mainstream, by adding these attractive investments to the choices offered within the highly popular ISA tax-saving wrapper – alongside cash and stocks and shares,” said Bruce Davis, cofounder and joint managing director of Abundance.
“This will radically boost the money that gets invested in socially useful infrastructure in Britain and will satisfy the increasing majority of people who want their money to be invested in the real economy, in projects that will make their lives better.”
In July 2015, the Treasury opened a consultation on whether debt securities offered by crowdfunding platforms should be eligible for inclusion within an IFISA. In November 2015, it confirmed that these securities would be made eligible from autumn 2016, following technical discussions with interested parties.
“The measure will increase the choice available to ISA investors, encourage the growth of crowdfunding and may improve competition in the banking sector by diversifying the available sources of finance,” the government said.