[P2P-F] Fwd: [gang8] How a revolution in business lending could transform the British economy - Telegraph

Fri Feb 1 07:59:05 CET 2013

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From: Dante-Gabryell Monson <dante.monson at gmail.com>

http://www.telegraph.co.uk/news/politics/conservative/9804025/How-a-revolution-in-business-lending-could-transform-the-British-economy.html
 How a revolution in business lending could transform the British
economy Peer-to-peer
lending has the potential to kickstart the economy by providing credit for
small businesses, says James Meekings.
  [image: Business Secretary Vince Cable Speaks at Grovenor House in London]
 Vince Cable, the Business Secretary, has backed Funding Circle and other
peer-to-peer lenders Photo: David Rose

By James Meekings

9:00AM GMT 16 Jan 2013

Despite some encouraging signs, the UK economy remains in trouble. Growth
remains weak and confidence fragile. Lending to small and medium businesses
– the motor for job creation – has collapsed. A series of Government
initiatives has so far failed to get the banks to start lending again. The
result is that thousands of well-run and profitable businesses are
struggling to get the money they need to invest, grow and hire more staff.

Even when loan applications are approved by banks, businesses complain
about long delays and the high interest rates they are charged. Given the
rock-bottom rates at which the banks can borrow themselves, this only adds
to their anger. With British businesses so important to growth, this is
deeply damaging to hopes for economic recovery.

It is why I am delighted to be taking part in the Daily Telegraph
round-table discussion today to discuss with bankers, politicians and other
experts about how we can get business credit flowing again. I believe
Funding Circle and the peer-to-peer lending industry as a whole has an
increasingly important role in this challenge.

So, importantly, does the Government. Last month Vince Cable, the Business
Secretary, announced he was investing £20 million of taxpayer’s money in
small businesses through Funding Circle. The move underlined the
determination of ministers to kick-start business lending and recognition
that this won’t be achieved by simply repairing the old system.

It was also a huge vote of confidence in peer-to-peer business lending and
a sign of our growth and impact over the last 12 months. The banks’ failure
to meet the needs of businesses has created the conditions for a whole host
of new entrants to come into the market.

These new types of businesses are leveraging the disruptive power of the
internet to deliver solutions that are better, faster and more efficient
than traditional operators.

Funding Circle is one of these entrants. We match people who want to lend
money with successful firms which want to borrow. All the businesses we
back are British.

From the moment we launched two years ago, it was clear that there was a
need and appetite for what we offered. Within our first 10 weeks, we had
arranged over £1 million of loans for established, growing businesses.

By enabling people across the country to lend as little as £20 to
individual businesses and enjoy a typical 6 per cent return, we’ve opened
the door to a new army of potential investors. We have now helped more than
1,400 different businesses with loans totalling over £70 million. New
borrowing is running at £7 million a month, a figure growing all the time.

It’s not just the government which is channelling investment to small
businesses through us. Local councils, too, are seeing Funding Circle as a
way of lending to their local businesses, demonstrating that peer-to-peer
lending is becoming a mainstream way to invest.

Nor is Funding Circle alone in moving into the gap left by the established
banks. There are a wide range of new entrants coming into the market. They
include Credit Asset Management, Zopa and Boost & Co who are also being
used to channel money from the Government to small businesses.

This does not mean, of course, that the new challengers can immediately
replace the banks as the prime source of business loans. These will, in the
short and medium term, continue to come overwhelmingly from these
traditional financial institutions. But while we may still only represent a
tiny part of the market, we are growing strongly.

As the Bank of England’s Director of Stability Andy Haldane has pointed
out, it was not that long ago when Google, too, was small. He said last
month that the internet had already transformed many other business sectors
and predicted it would have the same impact on small business high street
banking. Skype, Amazon and a host of new travel and music businesses have
already altered the landscape completely in their industries, providing
increased competition, better service and lower costs for consumers.

The Government’s decision to use new entrants to release the brake on small
business lending will help a similar revolution in the financial sector
gather speed. So, too, is the recent decision to regulate our industry – a
step we have been urging. Sensible regulation which improves safeguards for
investors without stifling innovation will give the sector added
credibility. Both these important moves will help increase banking
competition and, importantly, increase the flow of lending to British
business.

So what else could be considered which might accelerate these welcome
changes? One reform is to make tax-free the interest investors receive on
their loans to small businesses.

This could perhaps be achieved by finding a way of bringing such loans
within the overall tax-free wrappers of ISAs. It would not prove too
expensive but would make investing in small firms even more attractive.

But even without new moves, I see no reason why, over time, peer-to-peer
lending should not provide 10 per cent of the small business loans market,
in the same way that bond markets equate for a large proportion of big
business finance.

The last twelve months has seen peer-to-peer lending come of age. What was
at the beginning of 2012 still a fledgling industry is now providing a real
alternative for small businesses looking for investment and investors
wanting a better return on their money. Thanks, in part, to the
Government’s vote of confidence in our industry, I believe 2013 will be the
year that peer-to-peer lending will become mainstream.

This would be good news for small businesses, good news for investors and
good news, above all, for the economy as a whole.

*James Meekings is the founder of Funding
Circle<https://www.fundingcircle.com/?gclid=CJ-Ns9vy6rQCFWbKtAoda2kAWw>
*

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From: *D.J.Bezemer* <d.j.bezemer at rug.nl>
Date: Sat, Jan 19, 2013 at 9:53 AM
To: gang8 at yahoogroups.com

**

Interesting - this is the rebirth of the old mutuals, with ICT.

But they do not CREATE money - that part of the system remains stuck, and
without it no tranformation of the econmoy can take place.

Dirk

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From: *Hugh Whinfrey* <market at svarsmaal.dk>
Date: Sat, Jan 19, 2013 at 8:50 AM
To: gang8 at yahoogroups.com

**

**
I agree that these schemes are not creating money at present, inasmuch as
we ignore the interest on these loans.

However, the future of these things lies in building brands and brandname
identification around the scheme.

The step from there, especially during during a monetary crisis, to 'going
rogue' and floating such a scheme as a separate 'currency' is a minor step
once critical mass has been reached within a closed system with enough
participants.

For example, in the event of hyperinflation where existing money becomes
essentially worthless, such a step could be easy to motivate and undertake
in response.

That makes the details of the organisation of the scheme a critical issue.

Hugh

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From: *Geoffrey Gardiner* <geoffrey.gardiner at btinternet.com>
Date: Thu, Jan 24, 2013 at 9:27 PM
To: gang8 at yahoogroups.com

**

 This is most amusing. The suggestions are primitive and a scheme like
Japanese Loan Trusts is needed. I doubt if I have my files on the work we
in Barclays did on it in 1974. The Japanese Trust bankers told me they had
deposits from all Japanese. At that time the British public knew only
National Savings and Building Societies. I have mentioned before that in
1976 I suggested to a very senior BofE official that they ought to look at
foreign capital systems and he just went ballistic.

Geoff

  *From:* Hugh Whinfrey <market at svarsmaal.dk>
*Sent:* Saturday, January 19, 2013 7:50 AM
*To:* gang8 at yahoogroups.com

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