Online Alternative Finance Market Grew To £3.2bn in 2015

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New figures show that the UK online alternative finance sector grew by 84% to £3.2bn in 2015, but that the rate of growth is slowing down.

These were the main conclusions of a report just published by the Cambridge Centre for Alternative Finance at the University of Cambridge and UK innovation foundation Nesta, in partnership with KPMG and with the support of CME Group Foundation. The report is called Pushing Boundaries – 2015 UK Alternative Finance. It’s the latest in an annual series of reports from the University of Cambridge Judge Business and Nesta, which track the size and development of online alternative finance, such as P2P lending and crowdfunding, in the UK.

Although there was a significant increase in volume, the annual growth in 2014/2015 is nearly half the 161% growth seen in 2013/14.

The report said: “Although the absolute year-on-year growth rate is slowing down, the alternative finance industry still recorded substantive expansion across almost all models.”

The key findings can be found here.

Executive Director of Cambridge Centre for Alternative Finance Robert Wardrop said: “The substantive growth of alternative finance in the UK last year is not surprising, given that these new channels of finance are increasingly moving mainstream. One of the key drivers underpinning this development is the growing institutionalisation of the sector. The Cambridge Centre for Alternative Finance is proud to shed light on this fascinating and dynamic industry, to help inform policymakers, regulators and the general public about how these areas of finance are increasingly becoming part of our everyday economic life.”

Stuart Law, founder and CEO of Assetz Capital, one of the UK’s fastest-growing peer-to-peer lending platforms, said about the report: “The slight slowing of the alternative finance market in 2015 – despite increasing in lending volumes month-on-month – was to be expected. It was the year when many platforms took stock, and prepared for the next push. The figures are comparable to what we have experienced and if that continues, we anticipate a giant leap for the sector in 2016.

“The £3.2 billion already lent is an incredible achievement by the sector, but the agreements put in place with funds and financial institutions by a number of key platforms in 2015 will take effect in the coming 12 months. Thanks to two fund agreements, Assetz Capital is currently deploying more than half-a-billion pounds in funding lines for growth stage UK SMEs. This is just the beginning. We’re receiving more than £100 million of enquiries every month, which we expect to see increase to £250 million.

“As the Nesta report highlights, just 20,000 SMEs benefited from alternative finance in 2015. When you consider that there are in excess of four million SMEs in Britain, and that peer to peer lending is currently only 3.4% of all SME lending, there is a very long way to go in terms of awareness and uptake. After the past year of planning and preparation, Assetz Capital is ready and able to lend hundreds of millions to strong, UK SMEs to benefit them and the UK economy, so 2016 is set to send peer-to-peer lending into the stratosphere.”

Kevin Caley, Founder and Chairman of peer-to-peer business lender ThinCats, said: “For SMEs, it’s high time someone stepped in to bridge the funding gap, so it is encouraging to see that these latest statistics show that the alternative finance sector is stepping up to assist. 2015 was a stellar year of growth for the alternative finance market with business lending now making up 12% of all loans to UK SMEs.

“2016 is set to be the year that peer-to-peer lending is propelled into the mainstream when the Innovative Finance ISA launches in April this year, which will encourage new retail and institutional investment. However, as platforms grow, the temptation for greater intermediation and institutional investment will also increase, so I urge the industry to stay true to its core principles.”

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