An Irish fintech start-up is hoping that people across the State will start lending and borrowing not from a credit union or bank, but from each other.
Initiative Ireland, founded by father-and-son team Padraig and Padraig Rushe, is aiming to bring the first personal peer-to-peer lending platform to Ireland.
With deposits typically offering a return of less than 1 per cent, the founders of Initiative Ireland will be hoping that people will be prepared to “put their money to work” by taking on more risk by lending to their peers and earning between 5-7 per cent on their money.
The risks of lending your money to other people may be substantial. Peer-to-peer lending is not currently regulated, although it is something the Central Bank is looking at.
Initiative Ireland says it will “carefully manage” these risks by performing credit assessments to approve loans and spread the lender’s funds across multiple loans to minimise exposure to any one lender.
Initiative Ireland will also launch a “safeguard trust”, which is designed to offer a limited guarantee to lenders, compensating them for amounts lost on any of their loans.
For borrowers, the company expects to be able to offer loans at a saving of about 20-30 per cent on the cost of a typical loan. Irish borrowers can typically expect to pay interest at a rate of between 6-12 per cent for an unsecured personal loan.
Using risk-based pricing models, Initiative Ireland says it will offer “favourable pricing” to approved borrowers, with the best rates offered to those applicants who secure the best credit-scores.
Income tax relief
The company plans to create 25 new jobs in Wicklow over the next three years. It is currently looking to raise €2 million in equity investment in Ireland through the Employment and Investment Incentive Scheme (EIIS).
Under the terms of the scheme, eligible investors will be able to earn up to 40 per cent in income tax relief on investments in the company of up to €150,000. These funds will be used by the company to fund its 2017 commercial launch in Ireland, ahead of a planned UK expansion.
Mr Rushe snr was director of corporate banking at Bank of Ireland for more than 15 years where he had responsibility for several sectors including financial services/IFSC.
A former member of the Government’s Clearing House Group for the IFSC, he is also chairman of the International Finance Forum at FSI/Ibec. Mr Rushe jnr has previously worked at Ulster Bank and medical devices company Neuromod.
Peer-to-peer (P2P) lending has grown strongly across the world in recent years and accounted for more than €3 billion in lending in the UK last year and some €26 billion globally.
In Ireland, the activity has also gained pace, through platforms such as LinkedFinance and the Grid. Murphy’s Ice Cream in Dingle, Co Kerry, for example, recently raised €75,000 via LinkedFinance, in what is understood to be Ireland’s biggest P2P loan ever.
The funds were raised in just one day and 20 hours and will be used to help finance the fit-out of a new shop and show factory in Dingle.
