The CEO of online lending company Iwoca has written to the UK Chancellor warning that a government scheme to help small businesses access funding is “at risk of failure.”
Christoph Rieche wrote to Chancellor Philip Hammond on Thursday calling for a new task force to help repair the flagging Bank Referral Scheme.
The Bank Referral Scheme (BRS) was set up in November 2016 to help small and medium sized businesses (SMEs) access to loans and other financing. It came in response to a decline in lending to smaller businesses after the 2008 financial crisis.
Under the scheme, a bank that rejects an SME loan application must refer the business to an online platform. These platforms connect the business to fintech companies that might be able to offer them money.
Over 19,000 SMEs have been referred since the scheme was set up. However, Treasury figures show that only around 900 loans have been written. Iwoca said it is responsible for 55% of them.
“I am writing to you today because one of the cornerstone initiatives designed to help make finance more available to small businesses is at risk of failure,” Rieche wrote in his letter to the Chancellor, which was seen by Yahoo Finance UK. “Launched in 2016, the Bank Referral Scheme (BRS) has failed to deliver any meaningful impact.”
Rieche calls for a new task force, staffed by industry representatives and government staffers, to help “unlock its full potential.” Suggestions include making small businesses more aware of the scheme and using technology to make it easier to access.
“The BRS scheme remains one of the government’s potentially most transformational initiatives when it comes to making finance available to businesses,” Rieche wrote. “However, as with many ambitious targets, it does not come without complexity and more needs to be done to overcome them.
“We strongly believe this problem can be solved if banks, FinTechs and policymakers join forces.”
Rieche set up Iwoca in 2011. It offers online loans of up to £200,000 to small businesses, as well as online overdraft facilities. Iwoca has lent to over 25,000 businesses to date and the company announced in February it had raised over £150m in debt and equity funding.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at@OscarWGrut.