Written answers

Tuesday, 8 July 2014

Department of Finance

Financial Instruments

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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220. To ask the Minister for Finance if the practice of crowdfunding and peer-to-peer lending can be incorporated legislation in view of the recently issued consumer notice on crowdfunding, including peer-to-peer lending by the Central Bank of Ireland; and if he will make a statement on the matter. [29890/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Consumer Notice on Crowdfunding, including Peer-to-Peer Lending information notice which was issued by the Central Bank on 17 June 2014 was to alert consumers to the fact that crowdfunding, including peer-to-peer lending, is currently not a regulated activity in Ireland.

Crowdfunding, including peer-to-peer lending in respect of enterprise and other activities, is becoming an ever more popular alternative mechanism for businesses and promoters across the globe to access finance in the context of a more challenging financial environment.    In its various forms, crowdfunding including peer-to-peer lending allows individuals, businesses and promoters to solicit capital from funders, using social networks and crowdfunding platforms to finance projects. It appears to be affording real opportunities in the area of alternative non-bank finance for SMEs, particularly for those enterprises that have either been refused bank credit or who are less willing to formally apply for funding from traditional lenders.  Interestingly, however there is also innovative examples of SMEs using this type of funding to actually complement traditional bank debt financing.  Use of crowdfunding and peer-to-peer funding mechanisms have demonstrated substantial growth in the US and the UK in particular, albeit  targeted at minority and/or niche segments of the SME market.    

However, crowdfunding is in its infancy and financial returns on capital will dictate its overall success. Comparable data is not yet readily available domestically, at EU level or internationally with which to analyse its impact to date, although moves are afoot at EU level to consider methods to address this data deficiency.  Lending directly to small growth companies via peer-to-peer exchanges has expanded recently. Irish exchanges have not yet matched international levels but there are a number of platforms in the Irish market.  As this new source of funding grows the issues of consumer protection and regulation are also coming more to the fore in many countries. The Government, through the State Bodies Group, chaired by my Department, are considering how best to support the development of crowdfunding and peer-to-peer lending in a manner that enhances SME access to finance and promotes increased entrepreneurship and business development. This will include looking at examples of good policy practice in other countries.  We will also be closely engaging in the EU level discussions on this issue, including in particular the subject of any future regulation of the sector.  While we continue to keep these matters under review we do consider that crowdfunding and peer-to-peer lending has  a role to play as part of the range of bank and non-bank sources  of financing for SMEs in Ireland.

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