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Alternative finance set to boom in Australia

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Australian Broker | 11 Nov 2015, 07:30 AM Agree 0
Australia could be the next burgeoning market for alternative forms of finance, if regulators keep up with consumer demand
  • Patrick | 11 Nov 2015, 09:34 AM Agree 0
    Banks pool the credit risk inherent in their lending book and hold capital to absorb losses. How exactly will this be managed in peer to peer or crowd funding? I can't wait to hear the cries for government assistance when the defaults and losses roll in.
  • Terry | 11 Nov 2015, 11:45 AM Agree 0
    Exactly Patrick. The old thing where an investor scrambles for a deal that's too good to be true then cries fowl. Reminds me of the Bell Resources and Bondy situation.
  • Papery | 11 Nov 2015, 12:13 PM Agree 0
    Ermmm.....just a couple of small considerations, like Responsible Lending & NCCP. Just saying.
  • Leo Tyndall | 11 Nov 2015, 08:49 PM Agree 0
    Peer to peer lending is regulated and two of the providers, Ratesetter and Marketlend provide loss provisions and in the case of Marketlend, first loss protection and insurance as risk mitigants other than additional protections like stringent credit processes.

    It is not correct to say banks hold capital to absorb losses, as it is a fact that they hold a mere fraction of their loan exposure to cover any capital losses and leverage their capital to lend whereas a peer to peer lender cannot.

    Peer to peer lending is exactly that, a peer lending to a peer, the assets are matched in term, risk and the appetite of the lender is clearly determined by the lender not by a third party.

    There will be successes and failures as with any industry including the broker businesses. However this does not mean every peer to peer lender will be a failure.

    The regulatory regime which includes the National Credit Code and responsible lending does apply to peer to peer lending in the consumer lending space and they are not treated any differently than any other credit provider.

    The regulators do look to ways to enable regulation in this market that will support it but not to the detriment of the borrower or investor.

    Peer to peer lending is here to stay and as it offers a reduction in cost to the underlying borrower and an improved return to the investor by reducing intermediators, it makes sense.

    (the writer is the CEO of Marketlend, a peer to peer lender)
  • Maria Rigoni | 12 Nov 2015, 09:50 AM Agree 0
    Peer 2 Peer lending is another form of hard money loans and are as a result of NCCP having no balance between responsible borrowing and responsible lending.

    The NCCP regulators have allowed or more so encouraged lenders to be very discriminatory and want evidenced proof of current financial position rather than making reasonable inquiry into a person's financial position.
  • Patrick | 12 Nov 2015, 11:54 AM Agree 0
    Wrong Leo. You are now the intermediary and a "non-recourse" intermediary at that. I remain sceptical of the motives and ethics of large corporate banks, but they do underwrite most if not all of the credit risk from a margin for losses and also support this with a calculated and regulated minimum capital reserve. "Peer to peer" means that the lender takes the full direct credit risk of the exposure to the borrower as the name implies. All lenders use responsible lending and credit assessment criteria, but borrowers circumstances can change and there will always be defaults, hopefully only a few. I remember when solicitors used to arrange mortgage secured loans between clients as lender & borrower. This was peer to peer but was fraught with risk as the collection process and cost of enforcement as a mortgagee in possession is prohibitive without a pool of loans to spread the cost of the few that go bad.
  • Abey Malouf | 13 Nov 2015, 10:05 AM Agree 0
    Here's a great resource from ASIC on P2P lending in Australia:
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