THE SHIPPING sector could be ripe for a wave of peer-to-peer lending.
Shipping finance experts say that a withdrawal of bank lending has left a funding gap to help build and maintain vessels globally.
Finance for shipbuilding underwent a boom in the previous decade when China joined the World Trade Organisation, boosting a requirement for ships to help facilitate trade.
But many banks were hit by losses and falling demand after the 2008 financial crisis, leading some to withdraw from the market.
Matt McCleery, managing director of financial consultancy Blue Sea Capital, which advises on shipping transactions, says there is an opportunity for P2P lenders within this space.
Funding is typically required to build new ships or repair and maintain existing ones.
“Commercial banks traditionally active in ship finance continue to reduce their exposure to shipping, either through exiting the industry altogether or reducing the size of their portfolio, as a result of increased banking regulations and heavy losses suffered during the financial crisis,” he told Peer2Peer Finance News.
“Filling this funding gap has created an enormous opportunity for alternative lenders.
“There is plenty of room for more P2P lenders. The industry needs a lot of capital.
“The shipping industry needs about $200bn (£156bn) of capital a year to finance ships.”
One example of an entrant in the US is YieldStreet, which offers returns of 10.25 per cent for backing its short-term vessel refinancing project.
Nikos Nomikos, a professor of shipping risk management at Cass Business School, said P2P lenders would gain exposure to an exciting and important industry.
“You get an industry that directly contributes to the world economy,” he said.
“Ships and shipping is the lifeblood of global manufacturing.
“You have the transportation of raw materials and it is an industry very much related to global economic activity.
“It is also very exciting in a good sense as while it is very volatile there is always the potential for high returns.”