The German Market for Peer-to-Peer Lending
With a market share of 17.7%, Germany is the second-largest market for peer-to-peer (P2P) investing in Europe, surpassed only by France. P2P investing covers crowdfunding models where it is possible to make a profit as an investor with the largest and most famous business models being peer-to-peer lending (also known as crowdlending or marketplace lending) and equity crowdfunding.
Best Peer-to-Peer Lending Platforms in Germany
Here, you will find a list of the best peer-to-peer lending platforms in Germany. When choosing the best peer-to-peer lending sites in a country we consider a variety of factors that you can find in the Methodology below.
More P2P Lending Platforms in Germany
Below, you will find a list of the remaining peer-to-peer lending platforms located in Germany. If a new platform has been launched since this article was published and you do not see it here, please feel free to submit the platform by using the submit formula.
Statistics About P2P Lending in Germany
In 2017, peer-to-peer lending in Germany represented €396.7 million divided between P2P consumer lending (€325.3 million) and P2P business lending (€71.4 million). This makes Germany the second-largest market for peer-to-peer lending in the European Union, surpassed only by France with a total funding volume of €410.7 million.
Looking at P2P consumer lending, Germany’s funding volume €325.3 million represented the largest market in the EU, closely followed by France with a funding volume €293.0. However, with a P2P business lending funding volume of €87.7 million and €86.5 million, respectively, both France and the Netherlands were still slightly ahead of Germany’s funding volume of €71.4 million. If we include the UK to the European region, Germany still has a long way to go. In the same period, the UK had a total P2P funding volume of £4,660 million, so there should be plenty of room for further growth for Germany in the coming years.
Below, you will find a graph depicting the development in German peer-to-peer lending from 2015-2017.
The high overall growth rate of the German crowdfunding market explained in the section above can largely be attributed to the large growth in peer to peer consumer lending as well as real estate crowdfunding. P2P consumer lending has been the largest business model in Germany’s market for alternative finance since 2013.
In 2017, the P2P consumer lending funding volume grew 79% from €181.5 million to €325.3 million. However, though coming from a significantly lower funding volume, the German market for P2P business lending experienced an even more impressive growth rate of 206%, growing from €23.3 million in 2016 to €71.4 million in the same period. This growth came after a radical drop in funding volume, from €48.7 million in 2015 to €23.3 million in 2016, so it will be interesting to see how this business model has developed when a new report is published, probably in the second half of 2020.
Taxation on Peer-to-Peer Lending in Germany
Since there are no specific rules for crowdfunding, P2P Lending in Germany is taxed using the general provisions of the Income Tax Code (Einkommensteuergesetz – EStG). This means that the income generated by private investors (natural persons acting in a private capacity) is taxed as income from capital, which in Germany consists of a flat withholding tax of 25% and a solidarity tax add-on (Solidaritätszuschlagsgesetz – SolzG 1995) of 5.5%. If you are acting in a commercial capacity, you are taxed according to your personal tax rate and the 5.5% solidarity surcharge. For corporate investors, the tax on income from interest is 15% and the 5.5% solidarity surcharge.
If you are interested in learning more about how peer-to-peer lending is taxed in Germany, we can recommend this paper by Tobias H. Tröger from the Leibniz Institute for Financial Research SAFE. However, always make sure to seek counseling with an accountant for specific tax related questions.
P2P Lending Regulation in Germany
Regulation of peer-to-peer in Germany is based on general national legislation as there is still a lack of common rules for crowdfunding in the European Union. However, this might change in the foreseeable future as the European Commission in March 2018 presented a proposal for a regulative framework on crowd and P2P finance as part of their Fintech Action Plan.
Germany has had a Crowdfunding regulatory regime since 2015, which is composed of amended capital market laws and consumer protection laws. The crowdfunding regulation covers crowdfunding platforms that offer subordinated loans, intermediation of profit-participating loans, and comparable investment products. In Germany, P2P lending business models often involve the intermediation of licensed bank as these will often subject to the German Banking Act (Kreditwesengesetz – KWG).
Something that is practical to know if you are a foreign investor who wants to invest in German peer-to-peer lending is that lenders – in most cases – only need a German bank account to invest along with other basic requirements such as being over the age of 18. For borrowers, it is only possible to be granted a loan if you are a resident and have a German bank account.
Below, you will find an overview of some of the most important aspects of the regulatory framework for crowdfunding (including P2P lending) in Germany. These highlights can also be found in the impact assessment accompanying the beforementioned document.
- Bespoke Regime: Yes
- Scope: Profit-participating loans, subordinated loans, or other investment products (which grant the right to interest and repayment, or in exchange for the temporary provision of funds, grant a claim for cash settlement).
- Entry into force: 10 July 2015.
- Passport: Yes, if MiFID (Markets in Financial Instruments Directive) platforms (for transferable securities).
- Authorisation: Platform must be an investment service enterprise providing investment advice or investment brokerage services (MiFID) pursuant to Section 32 of the Banking Act (Kreditwesengesetz) or must obtain an authorization pursuant to Section 34f of the Trade, Commerce and Industry Regulation Act (Gewerbeordnung – GewO) from the competent authorities of the federal states (Länder), usually the trade office (Gewerbeamt).
- Minimum capital requirements:
- For MiFID platforms: Depending on the MiFID investment services and activities.
- For platforms with a commercial license: Professional liability insurance.
- Services provided: Investment advice or reception and transmission of orders.
- Financial instruments: To benefit from the prospectus exemption, instruments must be profit-participating loans, subordinated loans, other investment products which grant the right to interest and repayment, or in exchange for the temporary provision of funds, grant a claim for cash settlements.
- KYC rules (suitability or appropriateness; AML checks): Checks regarding the suitability or appropriateness of the investment for the investor pursuant to the Securities Trading Act or the Financial Investment Brokerage Ordinance; AML/CFT rules in case platforms qualify as obliged entities under the AML/CFT Act (depends on their business activities).
- Size of offer (limitations or prospectus requirements): Exemption from the full prospectus requirement for offers of profit-participating loans, subordinated loans or other investment products below €2.5 million. This exemption is not available where an investment of the issuer is being publicly offered using the exemption of Section 2 para. 1 no. 3 of the Capital Investment Act.
- Maximum investable amounts:
- If the investor has freely available assets of at least €100,000: up to €10,000 in an issue.
- If the investor does not have freely available assets of at least €100,000: twice the investor’s monthly income, but in any case, not more than €10,000.
- In all other cases (particularly if the investor does not provide a statement on assets and income): €1,000
- No limits for corporate entities.
- Disclosure to investors by the issuer: If no prospectus is required: Issuer must prepare an investment information sheet (VIB) and submit it to BaFin (Federal Financial Supervisory Authority). VIB must: present essential information about the investment; contain a notice that there is no prospectus approved by BaFin; contain a notice that further information may be requested from offeror or issuer; warn about the risks. Investors must confirm that they have taken note (signature or equivalent). Civil liability of offeror if VIB is misleading or inaccurate. Also, the issuer must comply with rules on marketing of investments (warning of risks).
- Information requirements & risk warnings by platforms: if platform provided investment advice: must provide the VIB (see above) to potential investor in good time prior to purchase of the investment.
- Due Diligence: N/A
- Conflict of interest: Platforms required to disclose any fees, payments or other monetary benefits that they receive from third parties other than the investors in connection with the services provided
- Professional requirements: Reliability, expertise shown by passing exam conducted by the Chamber of Industry and Commerce.
At P2PMarketData we are dedicated to providing an unbiased overview of the Peer-to-Peer Lending market and platforms. Among other, in our mission to bring more transparency to the market for online lending we track over 70 platforms funding volumes.
When choosing the best platforms in a country we have considered a variety of factors such as:
- Number of investors
- Minimum investment requirement
- Historical annual returns
- Diversification opportunities
- Reinvestment opportunities
- Educational and informational offerings
- Platform fees
- Total capital invested
- Features (such as secondary market and automatic investing)
- General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
- Management team
We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).