This study of 94 crowdfunding and P2P lending platforms examines the growth, trends and dynamics within the UK alternative finance sector in 2015.

Key findings

• In 2015, the alternative finance market grew to £3.2 billion.
• The market is taking an increasing share of small business lending and start-up investment. Alternative finance business lending is 12% of the market for lending to small businesses in the UK. Equity crowdfunding is 15.6% of total UK seed and venture-stage equity investment.
• The fastest growing models in 2015 were donation-based (grew by 500% since 2014 to £12 million) and equity-based crowdfunding (grew by 295% since 2014 to £332 million).
• The market saw increased involvement from institutional investors: 45% of all platforms reported some level of institutional involvement.
• Real estate is the single most popular sector: the combined debt and equity-based funding for real estate amounted to almost £700 million in 2015.

In 2015 the UK online alternative finance sector grew 84%, facilitating £3.2 billion in investments, loans and donations, according to a joint report published today by the Cambridge Centre for Alternative Finance at the University of Cambridge and UK innovation foundation Nesta, in partnership with KPMG and with the support of CME Group Foundation.

While the market is increase in volume, growth of the online alternative finance market is slowing down, with the annual growth in 2014/2015 being nearly half the 161% growth from 2013/14.

The report also highlights the rapid expansion of donations-based crowdfunding, the perceived risk of fraud and malpractice by the industry, and increasing institutionalisation – as around a quarter of P2P (peer-to-peer) loans are now funded by institutional investors, including traditional banks and government through organisations such as the British Business Bank.

'Pushing Boundaries' is the latest in an annual series of reports from the Nesta and the University of Cambridge, which tracks the size and development of online alternative finance, such as P2P lending and crowdfunding, in the UK.

Authors

Bryan Zhang, Peter Baeck, Tania Ziegler, Jonathan Bone and Kieran Garvey