Hats off to Lord Turner

  • 0
  • October 13, 2016
Sponsor going to meeting

Sponsor going to meeting

One has to applaud Lord Turner’s speech at the Lendit Conference on 11th October. It takes a real man to admit he was wrong.

Having dismissed Peer to Peer lending (P2P) in the past as something “that will incur losses that will make bankers seem like lending geniuses”, he now says “P2P is likely to become a stable and significant part of the financial system”. He now admits that “some platforms might be able to perform credit analysis better than the banks”, and goes on to say “they can certainly, in many cases, do it at least as well, while providing better customer service”.

Well, there is certainly joy in heaven (and on earth) for this penitent sinner! The regulators are at last getting an understanding of the industry and recognising that there are a vast array of P2P models out there, and that nearly every platform functions differently. I fundamentally believe that the ‘sponsor model’ that we provide, offers the best opportunities for lenders.

Why? Here are just some of the compelling reasons:
– The sponsor is the lender’s eyes “for eyes tell more than balance sheets“*, always meeting the borrower in his place of business and weeding out the ‘no hopers’
– The borrower cannot list himself by filling in an online application – the Sponsor is the ‘gatekeeper’
– Three levels of credit analysis and due diligence – the sponsor, the platform and the lenders themselves
– Levels of interest that factor in risk and allow the lender, with sufficient spread, to sustain a level of losses and still get a very good return
– Secured loans only – to established businesses
– No start-ups
– Security professionally taken by solicitors with covenants to match the security need

Lord Adair Turner is right, P2P lending is here to stay!

* Source: Moise Safra, quoted in The JC

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