Why security is king in P2P lending

From Stuart Law at FT Advisor:

“The Peer to Peer (P2P) lending market has risen from zero, around 10 years ago, to an outstanding investment level of more than £8.7bn of loans in the UK alone. Investors of all shapes and sizes are continuing to flock to the market, attracted by the prospect of a fair, risk-adjusted return on their capital and to beat the low rates offered from traditional sources. In fact, you’ll find what differentiates the various players in the market is how they deal with loan security. There are two key aspects to be examined in detail: 1) Pre-approval of loan: The checks put in place to ensure that high-quality loans are approved, where the loan can be afforded by the borrower but still recoverable in case one day it is not. 2) Post-approval of loan: The measures put in place to deal with loans defaulting and the recovery of capital in that situation.  ”

In the emerging market of peer-to-peer lending, it’s essential to present a security of funds and return for players in this market to attract investment. Investors concern more of their risk-adjusted return from an essential mean-variance analysis. Instead of focusing on promoting fancy and attractive conceptual terms, P2P lending providers need to show their effort in managing the risk exposure as for investors’ unit return of investment, as well as great management for dealing with repayments of loan. Capital Match is the largest player in Singapore the P2P Lending market with over $40 million origination, and it’s continuously offering investment invoice financing/PO financing options of good quality to help its investors have healthy growth of their portfolio.
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The Growing Alternative Finance Industry

From James Mackonochie at OFF3R Ltd:

“Peer to peer lending levels continue to rise in the UK. The first half of 2017 has an increase of over £350 million from the previous half year period at the end of 2016.The news is positive for the P2P Lending sector that is benefitting from the low interest rate environment the economy is currently in. As with equity crowdfunding, it will be very interesting to see how the P2P lending sector performs in the second half of 2017. ”

Peer to peer lending is fast growing in UK and other western areas. The similar trend is to be observed in Asia as well. Singapore, the Fintech Hub in Asia, has a large market of P2P lending especially in SME financing sector. A billion-sized market is helping SMEs obtain better working capital solutions. The range of products offered by P2P lending contains invoice financing, PO financing and a lot of new things are coming soon in the market.

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