Folk2Folk, a peer to peer lender that provides access to credit in local communities, says it paid out over £11.3 million in gross interest payments to investors during the financial year 2019. The company says 2019 was its biggest pay-out to date. The average fixed interest rate investors earn via the platform is 6.5% per annum. Today, on the Folk2Folk website the company quotes rates paid to investors ranging from 4.5% to 9%. Of the £11.3 million, Folk2Folk states that around 8% was via its Innovative Finance ISA (IFISA).
Folk2Folk offers secured loans typically with a short term. Until last year, only retail investors provided the capital but today several institutional investors are participating on the platform. Folk2Folk highlights the returns delivered to investors during a period of historically low-interest rates. An example provided by the P2P lender is a lender that provides £50,000. In a bank savings account, this person may generate £500 a year in gross interest but on Folk2Folk that amount, on average, would generate £3250. Borrowers must provide land or property with a maximum loan to value (LTV) of 60%. The minimum investment on the platform is £20,000.
“We’re pleased to see investor confidence remaining strong. We have an extremely high reinvestment rate and while we have some investors, whose investments have recently redeemed, who have chosen to temporarily ‘sit out’ during the pandemic, others are adding further funds on our platform. Since the beginning of March, we have facilitated £12.3 million of lending funded by both new investors and existing. We believe it is crucial for our country’s recovery to keep the economy moving, by facilitating loans and income generating investments, and we’re heartened that our investors appear to share that view.”
Folk2Folk also offers a secondary marketplace to provide liquidity for investors. The company also reports that default rates remain low, 1.43% of loan book as posted on their site, with no investors having lost capital. Since 2013, Folk2Folk has funded approximately £354 million in loans.
In its outcome statement, Folk2Folk comments on the ongoing COVID-19 crisis noting that their “credit review process is constantly adapting to external market forces, the pandemic has rendered some sectors much higher risk than previously, and this is factored into our decision making.” The company states they are fortunate that many of their borrowers are in the agriculture sector, or are rural borrowers, both remaining resilient during the pandemic.