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Peer-to-peer lending eyes mainstream after UK rule change

Published on Mar 22, 2014 1:59 AM

LONDON (REUTERS) - Peer-to-peer lending, where individuals lend money directly to small companies or other individuals, could be set to take off in Britain after the government proposed allowing such investments to be included in tax-free savings accounts.

Keen to improve returns for savers struggling with low interest rates and to help improve small companies' access to credit, the government said in its annual budget on Wednesday that it was looking at letting peer-to-peer (P2P) investments into popular tax-free Individual Savings Accounts (ISAs).

Analysts at broker Liberum said such a move would be a major boost for an industry which offers high returns, in exchange for the higher risks involved. They forecast it could jump in size to 45 billion pounds (S$94.5 billion) within a decade, from less than 1 billion pounds now.

"I think it will be a tipping point," said James Meekings, co-founder of P2P platform Funding Circle. "Tax breaks allow people to lend to slightly more risky businesses ... the challenges are the details of how it works with existing industry."

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