Institutions may be playing a growing role in peer-to-peer lending, but the majority of platforms still have a strong retail investor focus which may come in handy amid the coronavirus pandemic.
Around 50 per cent of funding for P2P lending in the UK was provided by institutional lenders such as funds and banks in 2018, according to the Cambridge Centre for Alternative Finance and there has been a shift among platforms since then.
Funding Circle has paused new retail investment as part of its involvement in the coronavirus business interruption loans scheme (CBILS), which will see institutional backers such as the British Business Bank (BBB) fund the emergency finance.
But that does not mean retail P2P lending is dead.
These only represent a handful of lenders and there are around 60 active P2P lending platforms on the market.
Some, for the time being, appear to be happy with a mix of both institutional and retail funding.
The BBB has historically funded loans alongside retail investors on platforms such as Zopa, RateSetter, and Assetz Capital, all of which are still taking new money and lending, albeit more prudently during the current climate.
The same is true among smaller lenders.
Last year, Goldman Sachs made a £200m commitment to fund loans originated by P2P lender Lendable, while CrowdProperty announced that it had received a £100m funding line from an unnamed “major financial institution.”
Scottish lender LendingCrowd has inked a funding deal worth £18.75m with the government-backed Scottish Investment Bank (SIB) and Dutch entrepreneurial bank NIBC, while CapitalRise secured £30m in 2019.
All are still open to retail investors.
There are P2P lenders awaiting the outcome of CBILS applications, which could cause more to shift to institutional funding, albeit temporarily.
Not all borrowers will be eligible for CBILS though so there will always be other P2P platforms to pick up the slack and welcome investor money to fund the rest of the market.