P2P move is one kite I really hope takes flight
I hope this is more than just kite flying, but I have been contacted by two senior figures in the peer to peer lending industry and told that they believe the Treasury is close to agreeing to allowing P2P savings to be placed in individual savings accounts (Isas).
I have been a fan of P2P lending since the advent of Zopa nearly a decade ago. As a concept it has many things to recommend it.
Firstly, it allows money to circulate easier around the economy as it brings savers and borrowers together in a safe environment.
Savers' cash is pooled together and lent to multiple borrowers thereby reducing risk, and over the past decade the default rate on these types of loans has stood good comparison to the banks.
Borrowers really appreciate not having to go to the banks too. I met with a group of entrepreneurs and as always the subject of lack of financing from the banks was brought up.
But this time around many just said that they were no longer bothering asking banks for finance but were finding loans from the like of Funding Circle, which is a P2P firm which specialises in lending to business.
It's not that P2P lenders are being loose, they just seem less bureaucratic and bloody-minded than the banks. You would be shocked how successful and long-established business people are being forced to place their homes as collateral by the big banks.
However, as yet P2P lending is relatively small – we need much more of it as returns to savers are higher than inflation and it allows business to invest and create jobs.
Allowing people to place a P2P investment in an Isa will boost the amount of capital flowing into this sector enormously. Everyone will be a winner: savers will enjoy tax-free returns, businesses will receive finance, banks will have greater competition, and the Treasury will enjoy the extra tax that come from economic growth and higher employment as a result of increased business investment.
As I say, I hope this is more than a kite and a real possibility.