LONDON: Britain’s peer-to-peer lenders provided 1.24 billion pounds ($1.87bn) of credit during 2014, taking total lending by the industry beyond 2.1bn pounds, more than double the figure at the end of 2013.

Peer-to-peer lending allows investors to lend directly to individuals and businesses via low-cost online platforms. It has grown rapidly since the financial crisis of 2007 to 2009, with bank credit remaining scarce for small businesses.

“These figures demonstrate the growing impact peer-to-peer lending is having on the market,” said Christine Farnish, chair of the Peer-to-Peer Finance Association.

“Last year showed continued and solid growth in the consumer market and a significant increase in lending flow to businesses. Invoice finance and peer-to-peer finance within the property market are also growing.”

This year could see peer-to-peer become a mainstream financing option as part of Britain’s ISA savings scheme.

ISAs, or Individual Savings Accounts, allow British residents to put up to 15,000 pounds in either cash or stocks and shares, the interest or returns on which are tax free.

The government is considering a third-way ISA for peer-to-peer lending following a treasury consultation in Dece­mber, which is expected to debut either this year or next.

There are still kinks to be ironed out, however.

Under current ISA rules, people must be given the option to transfer savings from one investment to another without penalty.

That is not possible with peer-to-peer lending, said Danny Cox, a spokesman for financial services company Hargreaves Lansdown.

“The only way to do it is to cash them in and then reinvest. But given the fact that there is no secondary market for peer-to-peer lending, that makes the process difficult.”

Published in Dawn, February 1st, 2015

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