Institutional funding heralded as positive for P2P
Institutional funds do not threaten retail lenders but are a positive for the peer-to-peer lending sector, industry stakeholders have claimed.
A panel at the P2P Leaders Forum, an industry event hosted by Peer2Peer Finance News under Chatham House rules, featured two P2P institutional investors and a firm that advises on this area.
Panellists agreed that institutional funds give platforms a certainty of funding and can help them grow, but it also works well as part of an mixture of capital alongside retail as long as there are protections in place to ensure that institutions do not receive better loans at the expense of retail investors.
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“I’d look at it as certainty of funding on a platform and also I do think there’s planning on a platform for getting the right mixture,” one stakeholder said.
“Institutions just form a good part of an overall mix.”
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“One of the attractions is it offers the opportunity for platforms to grow more quickly than just retail investors, it enhances the business by having two options of deploying capital,” another panellist added.
A panel member said that said institutional funds help platforms when the crowd can be “unpredictable”.
“In reality the crowd moves in a very unpredictable way, while borrowers need predictability in their funding, so in order to make the system work we need to find the right balance where have the P2P network but also some longer term reliability on sources of funding,” the stakeholder said.
Another panel member said that investors should be reassured by seeing institutional funds on a platform due to the thorough due diligence the platform would have completed to have received this.
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“I think retail investors should take additional reassurance seeing institutional investors in a specific platform,” the panellist said.
“The due diligence can take three weeks, a month or two months and it’s a testament to the robust model of the platform that is eventually funded.”