A compelling asset class: Exclusive interview with Atuksha Poonwassie

Atuksha Poonwassie of Simple Crowdfunding and the UK Crowdfunding Association talks to Marc Shoffman about the past, present and future of peer-to-peer lending

As co-founder of property lender Simple Crowdfunding and a director of the UK Crowdfunding Association (UKCFA), Atuksha Poonwassie (pictured) wears many hats and has seen the impact of regulatory change at platform and industry level. She explains why she feels the future for peer-to-peer lending remains strong.

Marc Shoffman (MS): Are developers still seeking loans in the current economic climate?

Atuksha Poonwassie (AP): We have seen a change in that there are more developers approaching us who are looking for funding. They tend to be larger. This is for both equity finance and P2P loans.

MS: What is driving borrower demand?

AP: The market conditions. The traditional finance options are potentially proving a little more challenging.

A lot of developers are embracing the crowd as they see the longer-term benefit of having a multitude of investors who will continually back their projects as long as they are delivering.

We are also seeing developers embracing the crowd on the P2P lending side as they can then access investors who may want to invest through an Innovative Finance ISA (IFISA), which is a great asset and also pension investing through a small, self-administered scheme.

MS: How much demand are you seeing from investors?

AP: Lots of investors are coming through. September is really the start of when the ISA investments ramp up so it isn’t a huge surprise for us.

One of the things we are seeing is that these investors tend to be slightly older, more than 50 per cent are above the age of 45. We also have investors over the age of 75.

The feedback we are getting is that these investors have ISA pots available, are looking for straightforward returns and like being able to invest in opportunities that have some sort of asset backing. They understand what developers are looking to achieve. It is a regular, steady return for them.

Read more: UKCFA’s 36h Group outlines strategy

MS: How do your interest rates compare with the wider market?

AP: Our interest rates have gone up in line with other lenders. Before we were seeing investor rates on first charge loans of between eight and 10 per cent, they are now between 10 and 13 per cent, that’s at 75 per cent loan to value.

Our second charge loans used to be between 10 and 13 per cent, now we are seeing those at between 12 and 16 per cent on average.

The market hasn’t changed, it isn’t even because we are looking to attract more investors, that is just what the market is demanding in terms of conditions such as inflation and the wider trends.

MS: Is the IFISA still appealing?

AP: The IFISA is still a viable product. The returns tend to be higher than traditional products and if people can fund an investment opportunity that does have some sort of asset backing as well and helps bring homes to market, it is a very viable option.

The feedback we are getting is that people want to use their IFISA allocations to fund projects. Our average investment on the ISA side per project is currently £15,000 and transfers are often higher. Our minimum investment tends to be higher as well, which helps.

Read more: Regulation special report: Status: It’s complicated

Depending how much a borrower is looking to raise, if they are raising a million or two, we may ask for a minimum investment of £5,000 or £10,000 depending on the offer. We are not at the £100 level of investment.

MS: Are you committed to the retail P2P lending market?

AP: Retail investors are part of the charm and benefit of being in the crowd space. We started off saying this is a great opportunity to allow everyone to be involved and we stand by that.

Things have changed because of new regulations such as appropriateness tests and the Consumer Duty but we are sticking with it as we regard it as an important service for customers.

We are still early in this space. There is a lot of work to be done to bring it to the forefront.

MS: What else can be done to improve the uptake of P2P lending?

AP: There needs to be more education and a better understanding from other sectors that manage or work with investors or customers such as independent financial advisers, providing a better understanding of what can or cannot be done.

MS: What trends are you seeing in the market?

AP: There is definitely a reduction in the number of smaller investors coming through but there is a certain level of people who will just continue. We haven’t seen a drop in the £12,000 to £15,000 mark.

However, when investors register on the platform it takes longer for them to start investing. Part of that is due to the appropriateness tests.

MS: What are the biggest regulatory challenges?

AP: The landscape is constantly changing. We have had everything from appropriateness tests to marketing restrictions and the Consumer Duty in recent years. It would be nice to allow things to settle down a bit. As platform owners we are constantly managing all the regulatory changes as well. It would be good to allocate time to focus on our businesses and users.

MS: What is your outlook for the industry?

AP: There will be more platforms exiting the space as it is a tough environment. It is more challenging to join this industry now. In terms of the opportunity it presents, my view has not changed one bit.

The opportunity is immense and it will absolutely benefit the general public and also fundraisers looking to bring projects and homes to market, allowing their businesses to flourish.

Read more: Prospectus reforms set to boost UK crowdfunding

MS: What does the future hold for the UKCFA?

AP: The UKCFA has been very focused over the past eight months in conversation with the Treasury and the Financial Conduct Authority (FCA), and we have also made changes within the organisation. Our 36h group is still going. It did take a break while we were looking at more recent changes. We have reinstated meetings and will be picking that up again.

Our priorities haven’t changed. We are still talking about lobbying the Treasury, the FCA and the British Business Bank. We are still looking at what can be done to remove P2P lending from high-risk investments, to generate standardised performance reporting and ultimately to present P2P lending as a compelling asset class.