Symbid [OTCQB:SBID], one of the world’s first investment crowdfunding platforms, is warning about industry risk. The company is warning that “investors are too preoccupied by interest rates and ignoring the risks”. According to Symbid, this lack of awareness has compelled them to launch a media campaign labeled “Higher Rates, Higher Risks” as they seek to educate investors.
Launched in partnership with Marco Behling of Catena Investments and Prof. Armin Schwienbacher of the University of Lille and SKEMA Business School, the campaign is intended to highlight three key challenges faced by the maturing crowdfunding industry: a lack of transparency; unsustainable interest rates; and a limited understanding of risk. It also outlines three potential solutions and why the present market opportunity for SME loans dictates that we act sooner rather than later.
“There’s a danger our industry is becoming short-sighted, prioritising interest rates above all else. Crowdfunding platforms do not tell the whole risk-return story, and investors don’t seem to understand why a 6% interest rate can be attractive. As banks turn their backs on SMEs, crowdfunding has an opportunity to provide a sustainable alternative to the ‘shadow banks’ now entering the market. Our unregulated industry can shape itself towards the future, leaving the 14% interest rates to the loan sharks.”
According to Symbid, the amount of credit provided by banks to SMEs is declining 7% year over year. This is leading to a “proliferation in the number of virtual loan marketplaces including credit uions, crowdfunding platforms and online lenders.”
Symbid, and its FundingNetwork, believes it is better positioned to provide debt financing for SMEs. Symbid states that the crowdfunding industry has an “opportunity to provide a sustainable alternative in the emerging SME loan market. The SME market is vital to the economic health of the European market. Symbid states that banks in the Netherlands rejected 39% of SMEs in 2014. This has fueled the growth of online lending platforms – from 24 in 2014 to 36 today (27 of those are unregulated). Symbid believes the SME loan market is enabling platforms and investors to push interest rates ever higher, “ultimately profiting no-one”.
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