DirectMoney says demand for marketplace loans is outstripping supply

Elizabeth Barry 17 May 2016


Australia's only listed marketplace lender wants more funds.

As the drive for peer-to-peer and marketplace loans continues to grow, the effects of the upswell may be starting to be seen. Australia's only listed marketplace lender DirectMoney announced in a statement to shareholders yesterday that it was unable to fully fund loans to borrowers.

Chairman Stephen Porges said the company would progress loan sales to institutions and develop a funding warehouse.

"We are rolling out a strong marketing program for the fund, which as we have said, will be a centrepiece of the DirectMoney business model in the medium to long term," he said.

"To support our excess loan applicants we are establishing a referral program with a trusted lending institution."

Marketplace lenders rely on a pool of investors to fund borrowers, and while most lenders allow investors to spread their risk across a portfolio of borrowers, the peer investor/borrower network is still necessary.

The term "marketplace" lender has become more commonplace recently, especially in the US, because the peer on the investing side of things is more likely to be a sophisticated investor, or, as is the case with DirectMoney, a financial institution.

DirectMoney is not the first listed lender to garner attention this week. In the US, Lending Club was found to have sold a portfolio $22 million of loans in violation of investors' instructors. After an internal probe, it was found that dates had been altered to make them comply with the investors' standards. The CEO resigned as a result.

Porges finished the stakeholder statement by saying that DirectMoney is committed to "diversified strategies to fund this demand".

While the demand is a good sign for the market, demand must be properly met. For a young industry and as Australia's only listed lender, it's an interesting challenge which may set the tone for other lenders' challenges down the road.

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