Micro-Firms To Play Key Role In P2P Lending Growth

Small businesses will be crucial to the expansion of the P2P lending market across the globe, analysts from Technavio said.

New data from Technavio research released on Monday (Aug. 1) said micro, small and medium-sized enterprise (MSME) lending will help fuel growth in the global peer-to-peer lending space between 2016 and 2020.

The P2P lending space is slated to grow at a more than 53 percent CAGR through 2020, predicted Technavio, noting easier access to technology, a lack of traditional bank lending interest in the MSME market post-financial crisis and other factors fueling P2P lending’s success.

According to Technavio, there are five key products offered by the P2P lending space for MSMEs: marketplace lending, merchant finance, invoice financing, trade financing and supply chain financing. “These lead to a belief that technology may create more such products in the future,” added Technavio in its announcement.

In a statement, Technavio lead analyst Amit Sharma said developing nations are particularly ripe to host P2P lending expansion, especially in the small business financing space.

“When an MSME gets new customers regularly, as in the case of manufacturing, automotive or heavy industries, the chances of the company having huge invoices are high,” Sharma explained. “It is known that SMEs have a disadvantage when dealing with a capital market regarding credit rationing and financing gaps.”

That gap, he continued, led to the rise in P2P lending. In recent years, however, there are other factors that energize the industry.

Businesses have become better at managing inventory, for instance, meaning corporate cash flow is enhanced and working capital is also better managed, researchers said. Continued development in the inventory management space will lead to further changes in how businesses manage cash flow.

Further “credit transformation,” Technavio added, will occur due to regulated, smaller financial players that have been encouraged to lend to small businesses, leading to increased financing and liquidity into the market.

“The P2P lending institutions offer risks, along with scenario analytics, for different products and services with real-time pricing and capital management of multi-asset portfolios,” Amit explained. “This unique tool would provide a transparent and detailed solution to clients to buy the products and services from the online platform.”