Alternative capital pathways on the up: FMA reports

Alternative pathways to capital through P2P and crowdfunding providers is seeing growth in New Zealand, according to an FMA report.

The FMA’s statistical report for the year ended June 30, 2020 covers activity by licensed P2P and crowdfunding providers that supply annual information returns to the FMA.

Registered investors on P2P platforms now number more than 34,000. While the number of investors with open investments increased slightly to 12,800, the total amount of outstanding loans on the lending platforms' books was $624 million. Up 8% over the year from 2019-20.

The levels of increase are substantial, especially when compared to 2017 which saw 8,000 open investments and approximately $360 million in outstanding loans.

Harmoney remained the largest P2P lending service provider in the year, accounting for more than half the industry’s outstanding loans. It stopped accepting retail lenders in April 2020, which will have an impact in subsequent years’ annual data returns.

In the crowdfunding space providers raised $16.5 million from retail investors in the year to June 2020. A 20% increase from 2019. Licensed crowdfunding platforms introduced 25 successful offers, compared to 19 in the previous year. Users of the licensed service in 2020 numbered 5,300 investors.

The total money raised by crowdfunding platforms was $34 million, including from retail and other wholesale investors.

According to Sarah Vrede, the director of capital markets at the FMA, the report shows a stable level of participation in a relatively niche sector of New Zealand’s capital markets.

“One of the main intentions of the Financial Markets Conduct Act is to promote innovation and flexibility in New Zealand’s capital markets.

“Peer-to-peer lending services provide an alternative form of borrowing and fixed-income investment, while equity crowdfunding services provide an alternative pathway for companies to raise capital in a cost-effective manner.