IRELAND’S peer-to-peer sector is flourishing largely thanks to the country’s demand for property development.
Property lenders such as Initiative Ireland and GLI Finance are well-established in the Republic, which also boasts business lenders like Flender, Linked Finance and GRID Finance.
And as Brexit draws closer, sending many financial firms across the Irish Sea in an effort to stay connected to the EU, we thought it would be a good time to take a look at the stalwarts of the growing Irish P2P scene…
Bricks and Mortar
Property investment underpins Ireland’s P2P market, with a series of firms focusing almost exclusively on the sector.
Last year Initiative Ireland funded a €1.5m (£1.3m) property-backed loan, which is also the country’s largest P2P loan to date.
The loan was for North Strand Five Lamps that will finance a social housing development in Dublin, consisting of 10 apartments and a ground floor cafe.
Meanwhile, Initiative Ireland sets up syndicates of loans for P2P lenders to fund and back residential development projects.
It is looking to raise €60m (£53m) by the end of 2018 and offers investors returns of between three and eight per cent.
The firm’s business model is underpinned by research that shows four times more houses need to be built in 2018 than in 2017 to match demand in Ireland.
The lender has said it intends to launch a new residential property fund worth €150m later this year. Initiative Ireland will act as the investment advisor on a €150m Residential Property Finance Fund alongside Irish wealth manager The Davy Group.
The senior debt fund will specialise in financing residential property developments and aims to fund the construction of more than 2,500 new family homes in high-demand areas across Ireland over the next five years.
The fund is targeting annual returns of between seven and 7.5 per cent, although it will initially be available only to institutional investors and qualified lenders who can invest a minimum of €100,000.
Recently, GLI Finance (GLI) offloaded its stake in an Irish fund dedicated to small- and medium-sized enterprises(SMEs) so it can instead focus on property lending in the country.
GLI said the proceeds of £7m will help launch a new property finance business in Ireland this August.
“The net proceeds of the transaction will be redeployed for general investment purposes including the launch of Sancus BMS’ property backed lending business in Ireland which is due to commence activities in August 2018,” GLI said in a stock market update.
“The company believes that this business should generate a higher return on capital compared to the historic working capital lending business.”
SME funding may trail property at the moment in Ireland’s P2P sector, but SME lenders are carving out a strong path in the country.
Irish SMEs are served by platforms like Flender, which launched in early in 2017 and has helped Irish businesses raise more than €1.28m to date.
The firm’s SME borrowers include a café and coffee roasting chain, a lingerie retailer, a further education provider and developers of non-toxic disinfectant technology at an average interest rates of 10 per cent.
However, the firm is also now reportedly looking at a €50m (£43.8m) debt financing round in order to fund its expansion plans into Irish property and new European markets.
Last year Flender raised £500,000 on crowdfunding platform Seedrs as well as £2m in equity funding and £20 million in leveraged debt finance.
In May 2017 Flender won full authorisation from the UK’s Financial Conduct Authority, and launched its own Innovative Finance ISA (IFISA).
As well as funding SME loans, the Dublin-based company allows users to borrow and lend money to friends, connections or businesses.
Borrowers can create and share a personalised link to their campaigns on social networks, or invite selected individuals to contribute to their loans directly by email.
Irish P2P lender GRID Finance funds invoice discounting, leasing and short-term loans SMEs in Ireland. The firm’s chief executive Derek Butler says GRID Finance’s focus is on competing with the country’s two main banks, Allied Irish Bank and Bank of Ireland.
Pensions are still a growing market in the P2P space, both in the UK and Ireland, but loans aren’t always eligible.
While P2P loans in the UK are technically allowed in self invested personal pensions (SIPPs), connected parties rules stipulate that there must be no connection between the lender and borrower.
Similar rules apply to Irish citizens who hold a Personal Retirement Savings Account or ‘PRSA’. This can prove to be a challenge for pension providers if a P2P loan is allocated to a large number of borrowers.
But despite the complex laws and regulations, last year the Irish lender Linked Finance entered the pensions market.
It now offers investors rates of six to 17.5 per cent a year to hold P2P loans in their retirement savings.
Underpinned by the booming Irish property sector, the country’s P2P industry has bright prospects. Its platforms continue to fundraise and expand with more opportunities being presented to investors all the time.