So we now have another prominent member of public life shooting from the hip with inaccurate generalisations about the peer-to-peer industry.
First it was Lord Adair Turner with his now famously rescinded comments about peer-to-peer lenders making bankers look like geniuses. Now we have Martin Whitfield, MP for East Lothian, warning entrepreneurs away from crowdfunding platforms on the basis that they are exploitative and unregulated.
Ironically, it seems that the intention of Martin Whitfield’s comment was actually a good one.
In the light of a report from Fair Business Banking APPG, published on 11 July, which highlighted systemic failure in the regulation of business banking, Whitfield was highlighting that entrepreneurs and small businesses are turning their backs on scandal-hit traditional banks and this is leading to run-down high streets and depressed economic growth.
“High Street banks, working on the classic banking model, are so close to losing the confidence of the people, full stop.” he said.
The Labour MP and members of the All-Party Parliamentary Group on Fair Business Banking are calling for an independent, low-cost tribunal system for businesses to turn to when they feel they have been mistreated by their banks.
“The demands that the banks are putting on to drive their profit are driving our entrepreneurs away, so they’re turning to crowdfunding and other means, but the problem is that regulation is lacking in that area, so there’s the potential for people to be exploited” he continued.
We know the overall context is that lending to small businesses continues to fall, largely driven by a fall in demand from the SMEs themselves, but also that a growing, vibrant and highly regulated alternative finance industry is filling a gap left by the banks and providing valuable choice for the SME market.
Such a shame that a few moments of research could have saved this MP from a well intentioned, but perfunctory comment that could discourage many small businesses, particularly those north of the border, looking at options that could be ideally suited to them.
One hopes that the industry, represented by the P2PFA, and the FCA will quickly act to put Mr Whitfield back on the right path.