Peer-to-peer lender Zopa says that the value of loans arranged through its online portal could more than double this year.
The site has facilitated loans worth £20 million in July, and expects to exceed £200 million this year, before doubling this again in 2014.
Zopa’s online platform allows investors and borrowers to make arrangements at more favourable rates than those offered by mainstream banks. The figures offer further evidence that lenders and savers are turning their backs on traditional sources in the pursuit of better rates.
A report released last month by the lender, based on findings by the Centre for Economic and Business Research (CEBR), found that more Brits have been prepared to risk alternative lending as rates on savings accounts have plummeted.
It shows that peer-to-peer lenders have provided investors with returns of around 3.4% above inflation on average, while stringent credit checks upon new borrowers has helped to keep default rates low (read more).
Unlike standard savings accounts, investors’ deposits are not guaranteed by the Financial Services Compensation Scheme.
But leading peer-to-peer lenders have encouraged greater regulation of the sector to boost confidence in the safety and robustness of their operations. The sector will fall under the regulation of the Financial Conduct Authority in 2014.
Expansion to Business Lending
Further evidence of growing confidence in the popularity of peer-to-peer lending is the promise of government funding for distribution to small businesses.
Zopa is awaiting a trench of government funds worth £10 million, which will be lent to sole traders.
"It's a big deal for us," said Giles Andrews, Zopa's chief executive.
"For any business to get some kind of government support after a lengthy due diligence process is a positive step, and it takes us into a pretty interesting new business area."
The move follows the failure of the Funding for Lending Scheme to reach beyond the residential mortgage market – a measure which has decimated the savings market and pushed more savers towards peer-to-peer lenders.
Keith McDonald
Which4U Editor
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