A fifth of UK investors are considering investing in debt instruments such as peer-to-peer lending although this figure rises to 34 percent among those aged between 18 and 34 a survey has found.
The report was commissioned by FJP Investment, an introducer of investment options to high net worth individuals and family offices. The survey also found that of the 950 respondents, 67 percent were wary of debt investment due to fears that borrowers may default on their loans.
The survey revealed that 40 percent saw debt investment as a good way to support UK businesses in need of capital but unable to turn to institutional lenders.
However, while peer-to-peer lending will certainly generate higher returns than traditional savings accounts, earlier this month the Financial Conduct Authority stepped in strengthen regulation in this burgeoning sector.
The FCA was prompted to act by the failure of development finance specialist Lendy and has pledged to limit marketing, strengthen governance and credit underwriting as well as forcing lenders to be more prepared for failure.
Notwithstanding, the UK is Europe’s peer-to-peer capital, with companies having lent £6.7billion in the last year, over £1 billion more than the rest of Europe combined.
The survey also found 9 percent of investors already had some form of debt investment. Jamie Johnson, founder of FJP Investment said in a statement: “Debt investment has become more popular over recent years, yet many investors remain wary of it. Such concerns are perpetuated by investment providers not conducting thorough due diligence of potential borrowers to ensure the risk of defaulting is as low as possible.”
He added that investing in debt can provide regular returns over several years, making it attractive to those who want better returns without committing to long term investments.
“Debt investment – and specifically peer-to-peer lending – is playing an important role in decentralising and democratising the loan market. It is enabling organisations to access capital from new sources if traditional lenders are not available or appropriate for them,” said Mr Johnson.
