In a new report, the World Economic Forum has suggested that new fintech players providing P2P (peer-to-peer lending) and crowdfunding services could be the answer to closing a $2 trillion funding gap for millions of small businesses worldwide.
The WEF cites that despite improving global economic conditions, financing from traditional lenders has been slow to ramp up, leaving SMEs struggling to obtain the funding they need to continue operations. However new players in invoice and supply chain financing, equity crowdfunding and SME-to-SME loan packaging practices should be seen as a credible alternative to traditional bank lending and thus supported by industry and regulators.
Commenting on the report, Michael Koenitzer, financial inclusion project lead at the World Economic Forum and Council manager said,
“Financing for SMEs is lacking although there is an ample amount of cash ready to get deployed. But in this case fintech disruptors are increasingly filling the gap banks and investors leave.”
P2P lending and other forms of alternative lending do pose a long term competitive threat to traditional lenders, but with a significant lending gap today and reluctance to lend to SMEs by traditional lenders, the traditional lending industry should look to partner and support this growing global phenomenon as some of the key lenders in the U.K. have done with leading SME lending platform, Funding Circle.
For more information on P2P lending in the UK and US see, An Introduction to Peer-to-Peer Lending: A European Perspective and The Disruptive Potential of Marketplace Lending in the U.S. Consumer Credit Market released in June and July 2015 respectively.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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