News Briefing - Crowdfunding, SME And Alternative Finance

pied piper followed by children

1. UK – AltFi

 

The advent of hand-held devices such as Smartphones and tablet devices has caused the financial technology industry to explode in recent years, with the ability to create all sorts of applications to drive the delivery of financial products, services, and processes with fast turnaround times, according to equities.com.

“Fintech is responsible for some of the ways people interact with companies and financial institutions that we generally take for granted. For instance, it is now easier to pay for goods and services, at a reduced cost. Financial inclusion has also increased, with people being able to use P2P lending platforms to access financial services and credit. 

Presently, the fintech industry is now considered a global multi-billion dollar industry, with the space being dominated by companies that offer financial products, payment services, uncollateralized credit and financial software for banking and the capital markets. The number of companies providing fintech products and services has expanded over the years, with more investments pouring into this space. So the question is: why are so many startups flocking into fintech? Is there going to be a point at which the industry will become saturated?”

 

Why are so many startups into fintech? Will it soon become saturated?

 

2. UK – AltFi

 

Lawyer Monthly reports:

 

A recent survey by MHA, the national association of independent accountancy firms we are a member of, revealed that total external funding per equity partner in small and mid-sized practices decreased significantly in 2017, ranging from £42,000 in the smallest firms to £228,000 in the largest, compared with £156,000 to £506,000 last year. While reducing external finance may seem to be a positive move, it is more likely to have been driven in part by bankers putting pressure on firms to reduce overall lending. Kate Arnott, Head of Professional Services at MHA MacIntyre Hudson, explains for Lawyer Monthly.

Of the firms surveyed, bank borrowings fell significantly in all firms except sole practitioners, who tend to fully guarantee borrowing in their own names. Bank borrowings per equity partner ranged from £19,000 to £112,000 (in the largest practices) in 2017, compared to £21,000 to £228,000 the year before. 

 

 

3. UK – AltFi

 

Crowdfundinsider reports:

“This past week, HMRC released numbers on the relatively new Innovative Finance ISA(IFISA) that enables savers to invest in debt based crowdfunding offerings. The UK government indicated that IFISA participation had topped £290 million during the 2017/18 tax year, or 8 times more than the 2016 / 17 figure of £36 million.

The UK Crowdfunding Association (UKFCA) issued a statement on the IFISA report stating;

“The rapidly expanding take up of the IFISA by the public is great news for both investors and the UK economy. Investors choosing IFISA can diversify their investments across a range of different businesses and projects. Their money goes to work creating jobs and sustainable growth. The UKCFA represents a range of platforms investing in both bonds or loans from high to low risk, inflation beating returns and short to long term investments.  All platforms have seen strong growth this year reflected in a big proportion of the more than £290 million invested in IFISA last tax year.” 

Bruce Davis, the Director of the UKCFA and co-founder / Joint MD of Abundance investment, shared some additional insight into the IFISA progress. Davis told CI that the IFISA was having no discernible impact on equity crowdfunding platforms (which may also offer debt based securities).

“Equity investing and debt / loans are very different investments in terms of financial need and investor profile,” said Davis – noting that equity crowdfunding is not eligible for inclusion in an IFISA – but it already has generous tax incentives through EIS etc. “

Asked if the forthcoming regulatory changes in loan based crowdfunding will impact the IFISA, Davis said they don’t expect any impact at all.

“… we welcome the introduction of effective methods for platforms to ensure people understand the risks and can access all the relevant information about their investment in a straightforward and transparent way,” Davis added.

Davis believes that better messaging will help educate the population on the benefits of the IFISA;

“The main platforms are talking about the benefits of their investments in terms of returns and positive impact on the real economy versus other forms of investing,” Davis stated.”

 

This past week, HMRC released numbers on the relatively new Innovative Finance ISA (IFISA) that enables savers to invest in debt based crowdfunding offerings. The UK government indicated that IFISA participation had topped £290 million during the 2017/18 tax year, or 8 times more than

 

4. UK – AltFi

 

Crowdfundinsider reports:

 

“As in most parts of the world, smaller businesses drive the bulk of job growth in the UK. Over 99% of all UK businesses are SMEs employing 0-249 people and 96% (approximately 5.5 million) are micro-businesses employing up to 9 people, accounting for 33% of private sector employment and 22% of turnover. Thus, it is profoundly important that these same small businesses have access to capital to grow and expand.

Simultaneously, these businesses tend to be riskier credit propositions and established banks are frequently not interested in providing riskier loans. A plan in the UK requires that banks who reject SMEs must be directed to alternative finance providers – typically online lenders.  As reported by HM Treasury this past week, to date the Bank Referral Scheme has helped to source over £15 million in funding to British SMEs.

According to Treasury, during the past 12 months, 670 businesses have raised over £12 million of funding through the Scheme, four times what was raised in the previous year. Loans resulting from the program have ranged from just £100 to £1.3 million. The average size of a loan secured was £17,285.”

 

As in most parts of the world, smaller businesses drive the bulk of job growth in the UK. Over 99% of all UK businesses are SMEs employing 0-249 people and 96% (approximately 5.5 million) are micro-businesses employing up to 9 people, accounting for 33% of


5. International – FinTech

 

Speaking at the very first OECD Blockchain Policy Forum taking place in Paris this week, OECD Secretary General Angel Gurria opened the conference calling blockchain (or distributed ledger technology) an “unprecedented technological revolution.”

The Forum saw the participation of multiple public officials including the Premier of Bermuda – E. David Burt, the Prime Minister of Mauritius –  Pravind Kumar Jugnauth, the Prime Minister of Serbia – Ana Brnabić and more.