One of the largest providers of peer-to-peer loans in the State has shut down a key part of its business aimed at smaller investors, blaming an absence of regulation in the crowdfunding space.
Grid Finance, which is backed by Enterprise Ireland, wrote to holders of its “Brick” accounts – that facilitate the investment of up to €100,000 – in recent days stating that it would withdraw the offering from the marketplace.
Chief executive Derek Butler said that, in the absence of a regulatory framework, dealing with the smaller investors that hold the accounts was proving to be too taxing for the company.
"We take our responsibilities very seriously as a platform," he told The Irish Times. "The responsibility to educate and inform to make sure smaller investors are making responsible investments is significant," he said, adding that there is a "much heavier cost impact" from servicing the smaller customers.
“In light of there continuing not to be a regulatory regime for peer-to-peer, we have decided to suspend acquiring new Brick accounts,” he said. “It’s very hard for us to invest when there’s no regulatory regime, a lot of additional costs, and frankly, additional responsibility.”
Grid Finance has raised over €2.5 million for businesses on the accounts since launching.
The company will continue raising finance on its so-called Block and Beam accounts, which allow investments up to and above €3 million from individual lenders, respectively. The funders on those branches of the platform are largely institutional investors or family offices, rather than the spread of smaller funders which peer-to-peer lending was originally aimed at.
Mr Butler said he had no confidence the Government would bring in legislation governing the sector, promised by Minister for Finance Paschal Donohoe in the last budget. “Despite our efforts to advocate for a regulatory regime, there is none.
“It’s Merrion Street, in the sense that it’s the Department of Finance that defines policy and writes the laws, and that’s where the responsibility to introduce a regulatory regime currently lies,” he said.
He added that there had been “no engagement” on a regulatory regime since the budget. “We’re not expecting, based on our experience to date and how quickly these things move, a regulatory regime to be in place for at least a couple of years.”
He said the company would consider relaunching the accounts if regulation was introduced.
