MARKETPLACE lending could top £7bn this year after reaching a record level in 2018, according to Link Asset Services’ inaugural Marketplace Lending Index.
Powered by Brismo (formerly named AltFi Data), the index shows that the value of gross marketplace lending conducted by tech-enabled platforms (which includes crowdfunded or peer-to-peer loans) climbed by £1bn to a record £6.1bn in 2018. Demand for invoice finance and business loans were key drivers of growth.
Read more: Invoice finance continues to grow
Link and Brismo forecast gross lending to reach £7.3bn in 2019, but note that the market faces greater regulation and economic uncertainty.
Marketplace lending hit a quarterly record of £1.6bn in the last three months of the year, up 13.9 per cent year on year. However, the rate of growth halved from 39 per cent in 2017 as the market matured and losses increased, with higher risk consumer and business loans dragging on net returns. Net returns after losses and costs stand at 4.1 per cent, down from recent high of 6.4 per cent in 2016, but “hard to beat elsewhere in the fixed income market”, the report said.
Meanwhile, property lending grew by just 2.1 per cent last year, hampered by the challenges facing the wider housing market, although performance between lending platforms varied.
Read more: IFISA guide: Property loans
But, overall, the figures point to the explosive growth seen in the P2P sector. Link and Brismo point out that, in 2011, new gross lending amounted to just £92m. It now takes just under six days for marketplace platforms to originate this amount.
“This lending performance index reveals that an impressive risk premium has been available versus equivalent duration assets ever since Zopa emerged as the first P2P lender in 2005,” said Rupert Taylor, chief executive of Brismo.
“The success of this emerging capital market relies on loan originators ability to reliably attract capital to fund borrowers.
“UK platforms have been the first non-bank loan originators globally to recognise that attracting a diverse funding base relies on demonstrating accountability for performance to investors whilst ensuring that capital can be deployed based on sound analysis and an efficient process.
“Standardised measurement of loan performance helps to achieve this. As disclosure evolves further and gains progressively wider adoption, investors will benefit from reduced complexity and improved insight, which will further increase the appeal of these assets to a wider universe of capital providers.”