Alternative lending finally comes of age in Australia

Published on the 12/10/2017 | Written by Jonathan Cotton


Aussie Alternative funding

It’s taken its sweet time getting here, but Australia's ‘alternative finance industry’ (read peer-to-peer lending and crowdfunding and the like) is kicking into high gear...

Australia now has an $783 million alternative finance market – a staggering 53 percent growth over the past 12 months – making it the second largest market in the Asia Pacific (second behind only China).

That’s according to KPMG’s recent report, Cultivating Growth: The 2nd Asia Pacific Alternative Finance Industry Report, which reveals that the alternative financing marketing in Australia – and the region as a whole – is booming.

In 2016 the report said, the alternative finance market across the Asia-Pacific region grew to a total market volume of AU$315 billion (growth of 136 percent compared to 2015).

Of the growth, balance sheet business lending was the most popular form of alternative finance, accounting for over US$217 million, up 80 percent from US$120 million in 2015. The second largest segment was marketplace/peer-to-peer consumer lending, followed by invoice trading, then peer-to-peer property lending.

It’s good news, especially considering how long it’s taken the country to get the appropriate legislation across the line.

First calls for submissions were made in 2014 and only now are the results of that process coming into effect by way of the Corporations Amendment (Crowd-sourced Funding) Act 2017.

That document amends the Corporations Act 2001 to extend the crowd-sourced funding framework and outlines additional reporting requirements and accountability standards,  and introduces special investor protections, among other things.

“The Government understands that different forms of finance are particularly important for innovative, early-stage businesses that may have difficulty accessing funding from traditional sources,” said Australian Treasurer Scott Morrison.

“As part of this Bill, proprietary companies wanting to access equity crowdfunding will no longer have to convert to a public company entity. Instead founders will be able to crowdfund while retaining the greater flexibility of the proprietary model.”

While alternative finance is still a relatively small portion of the financial system, it’s growing fast, and the government actively seeking to facilitate crowd-funding and peer-to-peer lending options, the future looks bright.

New Zealand has already shown the potential of the platform (AU$11 million invested through equity crowdfunding in 2014, its first year) and the US has already presented itself as an over-legislated, cautionary tale (AU$47million was invested in the first year in the whole United States of America).

At this rate there’s no reason why Australia couldn’t become a global leader in alternative finance options.

Download the KPMG study, Cultivating Growth: The 2nd Asia Pacific Alternative Finance Industry Report.

 

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