The Potential Benefits of Brexit for Peer to Peer Lending
You don’t have to look too hard to find predictions of a downturn in peer to peer lending as a result of the United Kingdom’s vote to leave the EU. The pound took a decisive tumble, markets entered turmoil, and an overall sense of uncertainty began to pervade the financial world.
Of course, it is likely that peer to peer lending will experience some negative effects due to the Brexit decision. In uncertain financial times, people do tend to stick to what they perceive as safer investments, and traditional options typically win out in this regard.
That said, Brexit could spell some positive effects to counterbalance those issues. One of the most attractive is an increase in smaller investments. Peer to peer lending is still something that many people think can only be done with a large amount of capital and a detailed understanding of financial markets. In fact, the practice can be easily understood, and many borrowers are seeking out money for projects or investments that are easier to grasp than stocks and bonds.
Any economic downturn is likely to lead to lower interest rates from traditional investment options. With this in mind, people could start looking to peer to peer lending projects in order to invest their money. With economic uncertainty ahead and low interest rates offered by the banks, it only makes sense to put some money into peer to peer, which often sees returns of around 15%.
We could also see a more determined effort from the government to offer tax breaks for peer to peer lending projects. After all, the United Kingdom was the world’s first country to develop regulatory frameworks for the peer to peer lending industry, and few international markets have successfully emulated them. Given this established framework and the ever-present need to increase funding options for small businesses, the majority of which have already expressed concern over the Leave campaign’s victory, the government could step in to offer further incentives.
The long-term effects of a Brexit won’t be felt for years, but peer to peer investment schemes should continue to offer an excellent alternative to middleman alternatives.
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