Opportunities in mainland Europe for UK investors

Investors who want to expand their peer-to-peer lending portfolio overseas have seen their choices shrink since Brexit but there are still ways to earn returns of up to 12 per cent.

As with any investment, due diligence is needed so you understand what and who you are backing. You won’t be able to enjoy tax-free earnings from an Innovative Finance ISA wrapper, which is a UK product, but investors can still earn 12 per cent returns by looking to the continent.

For example, Croatia-based consumer lender PeerBerry aims for returns of between nine and 12 per cent, while Latvia’s Lande targets returns of nine per cent for backing its agricultural loans.

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Investors on Estonian consumer and business lending platform Bondora can expect returns of between five and 10 per cent, while Dublin-based business lender Flender currently achieves an average return of 9.3 per cent.

These platforms are all open to UK-based investors.

One of the largest platforms in mainland Europe, Mintos, does not allow UK investors to join, while Twino will only let UK residents invest if they open a company in Latvia to invest through.

There are two types of P2P lending platforms in Europe for investors to choose from. Firms like Bondora and Flender will source and arrange loans directly, while P2P lending marketplaces such as Mintos and PeerBerry connect investors with a variety of loan originators. They do not get involved in the underwriting process for each application beyond vetting the lenders accredited to their platform.

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“I believe this model has mostly occurred because it makes it so easy for euroland countries to expand geographically across the continent,” said Neil Faulkner, founder of P2P research firm 4th Way.

“From there, they have sometimes taken it further by expanding into non-euro countries too. Another factor is that, on average, the founders of European platforms have less direct banking experience than in the UK, which means it makes sense to effectively outsource it.”

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