Fifty savers a day joining peer-to-peer lending site
Published 18/02/2016 | 02:30
POOR returns for savers who put money on deposit in banks has prompted an upsurge in what is known as crowd lending.
This is where a large number of people lend funds to business ventures by contributing small amounts each, typically via the internet.
So popular is the crowd funding concept becoming in this country that around 50 new lenders each day are joining the crowd lending platform operated by Dublin-based Linked Finance, the company said.
Since it was founded in 2013 some 11,000 people have loaned out €16m in total in crowd lending through the site.
People are turning to this form of investing as returns from depositing money in banks are so low, Linked Finance chief executive Peter O'Mahony said.
Linked Finance allows consumers to contribute to the funding of small and medium-sized businesses, by bidding to provide a portion of a loan.
The average return earned by Linked Finance lenders on loans is 9.7pc, according to Mr O'Mahony. This interest is categorised by the tax authorities as income earned from investments and is taxable as income, the firm said.
Banks are now paying an average of just 0.21pc on new deposits, according to the Central Bank.
Mr O'Mahony said the average loan amount is for €28,000 over three years and this would typically be made up over 100 contributions from lenders.
Linked Finance is the leading Irish peer-to-peer lending platform.
Most loans are over-subscribed, so the lender gets the amounts, or bids, offered that were at the lowest interest rates.
Lenders typically have about 13 loans made to small and medium-sized firms (SMEs), and each averages about €220.
Mr O'Mahony said the interest earned varied from 5pc to 15pc, depending on the business consumers lend to.
People were responding to the fact that bank interest rates on deposits were so low, he said.
Lenders can lend as little as €50, most lend upwards of €3,000, across multiple loans.
The average loan is typically financed by contributions from 100 to 200 successful lender bids. He said all borrowers are thoroughly screened by Linked Finance to control risk.
Mr O'Mahony said businesses from across all 26 counties have successfully secured loans through Linked Finance lenders.
The Central Bank has issued a warning to consumers in 2014 over the unregulated status of crowd funding and peer-to-peer lending.
Linked Finance said that the company wanted to see the industry regulated. The Irish firm operates to standards set by UK regulators.