What is the Impact of COVID-19 on Peer to Peer Lending?

Peer to peer lending research firm 4thWay is out with a short note on the impact of the Coronavirus (COVID-19) pandemic on the P2P industry.  According to 4thWay, a minority of investors are selling their loans due to the affiliated risk of the outbreak. The report notes that unlike the recent stock market collapse, investors selling their loans did not do so at hugely discounted prices.

4thWay states that RateSetter, a platform primarily in personal loans, has been one of the affected platforms. RateSetter provided the following comment:

“The performance of RateSetter’s portfolio has been stable, as can be seen from our published statistics, and our expert credit risk and borrower services teams actively monitor and make adjustments every day. In the current climate, we will give support to our borrowers. Our provision fund is managed with a buffer to be a shock-absorber for external events and our focus remains on investor protection.”

CrowdProperty, a P2P  property development platform, says it is approving new loans as normal.

Michael Bristow, CEO of CrowdProperty, commented:

“It appears likely that the pandemic will weigh on economic activity, at least in the short-term, and this has had bearing on global equities markets. Real estate, however, is neither the cause nor the centre of this problem like it was in 2008. Our project pipeline remains strong and we will continue to monitor all projects very closely with our expert eyes. In times of stock-market volatility, robust well-secured debt products are attractive to an even wider range of investors.”

Neil Faulkner from 4thWay, had this to say:

“This is the time when the P2P lending industry will prove that direct money lending is a very solid investment, providing stable results compared to the stock market, shared more fairly between participants. The banks continued to make decent profits on their bread-and-butter personal, business and property lending, even through the height of the economic downturn from 2007 – 2009. The one P2P lending platform that was around at that time easily kept pace with them. We’ve never seen anything like this pandemic before, but, while global markets are crashing, the vast majority of peer-to-peer investors will continue to profit through the crisis, thanks to sensible underwriting standards, solid security, provision funds set aside to cover bad debts, and attractive interest rates.”

4thWay recommended that P2P investors continue to diversify across different platforms and “hundreds or thousands of loans” to help mitigate risk.

Additionally, the company said it is best to lend across a variety of types of loans, including small business lending, personal lending, development property lending, and lending against tenanted properties.

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