German marketplace Zencap says the ‘Retail Investor Protection Act (Kleinanlegerschutzgesetz)’, passed into law in July 2015, is the main cause for a shortage of new loans on offer to retail investors on the platform. While Zencap welcomes regulatory guidelines, the company thinks that this law was not thoroughly thought out. Zencap stated: ‘For investors it is confusing that an investment into loans to companies for an amount of more than 100,000 Euro should be subject to different regulatory conditions than loans below that amount.’ (own translation from German original source).
While Zencap could offer loans regardless of size to retail investors in the past, it is has now restricted its offer to retails investors in Germany to loans up to 100,000 Euro as it would be forced to serve a prospectus (‘Vermögensinformationsblatt’) for which the borrowing company would be liable. Continue reading →
Today Lending Club announced that it opens to investors from Texas and Arizona. Lending Club is now open to retail investors from 30 US states.
“We are delighted to announce the addition of two key states today, which we believe will help drive more individual investors to our platform,” said Lending Club CEO Renaud Laplanche. “Our marketplace gives investors unprecedented access to consumer credit as an asset class, and empowers investors to diversify their investment across hundreds or thousands of loans. We are thrilled to be able to bring this access to investors in Texas and Arizona and appreciate the work done by the state regulators that allowed this to happen.”
Swedish crowdfunding marketplace Fundedbyme today announces that its partner Alix Global Sdn Bhd, was awarded one of six coveted licenses to operate equity crowdfunding in Malaysia. Malaysia is the first South-East Asia country offering equity crowdfunding licenses. The license allows FundedByMe to start operations in the new market.
The announcement follows careful deliberations by the Malaysian Securities Commission, which closed submissions for licenses in May 2015. The license comes under Section 34 of the Capital Markets and Services Act (2007), by the Malaysian Securities Commission. It will permit the selected platforms to help privately owned businesses raise money from a spectrum of investors – including institutional, accredited, and retail investors – with limitations placed on non-accredited investors.
“We’re extremely excited to be one of the few platforms selected by the Malaysian Securities Commission today, which is a first for the region, and marks a historic moment for Malaysia and the crowdfunding industry. As a business-building crowdfunding platform, we together with our partners Alix Global are thrilled to help build this fast-growing industry of which empowers businesses through crowdfunding,†said Daniel Daboczy, CEO and Co-Founder of FundedByMe. Continue reading →
This is a guest post by an author working in the financial sector in India.
Consumer Peer to Peer or P2P lending (where consumers lend and borrow from each other with the help of an intermediary) has become an important part of the financial services sector in many countries globally. Companies like Lending Club and Prosper in the US, that only started a few years ago are now worth billions of dollars. Many success stories in the west have been replicated in India, making it a belief amongst many that P2P Lending is no different. However, as proven multiple times before, a credit business isn’t the easiest to clone and depends on multiple factors including the regulatory environment, end-user mindset towards credit and intermediaries such as credit bureaus, verification, collection and recovery agencies.
P2P Lending is not regulated in India
The Indian Banking Regulator, The Reserve Bank of India (RBI) has not regulated peer to peer lending in India. This essentially means that privileges enjoyed by similar platforms globally, namely, access and reporting back to credit bureaus (like CIBIL in India); are not available to a P2P platform in India. These have important repercussions on the performance of loans originated through these platforms and can lead to suboptimal results. For e.g. if lenders are not able to see credit reports, then they will be in an inferior position compared to banks and other financial institutions to make credit assessments. Similarly, without the loan performance being reported back to the bureau, some borrowers may not feel the pressure to re-pay their lenders. Lastly, borrowers looking to build and improve their credit rating do not benefit, as their loan performance is not reported to the credit bureaus (CIBIL).
Little spread between risk-free rates and borrowing rates from banks and other regulated financial institutions (NBFC’s) provides no real benefit to borrowers
A huge difference between the west and India is the difference between the risk-free rate and the borrowing rate. In the US and UK the difference between the two is as much as 12-15 percentage points. In India, the risk free rate is at over 8% and banks lend money starting at 12%. With lenders looking to make returns between 15-16%, the rate for the borrowers gets as high as 20%+ when the platform fee is also taken into account. This makes it unsuitable for lower risk borrowers who can find cheaper loans from banks and non-banking financial companies (NBFC’s). Continue reading →
This is a guest post by Leo Tyndall, CEO and founder of Marketlend.
The peer-to-peer lending industry remains embryonic in that there are only two Australian peer-to-peer lenders, Society One and Marketlend. The remaining peer-to-peer lenders RateSetter and ThinCats are spin-offs of their UK operations -RateSetter Australia is by now only partly owned by Retail Money Market.
The focuses of both Society One and RateSetter are personal loans whereas ThinCats and Marketlend focus on commercial lending. Legal structure by Society One and RateSetter is a managed investment scheme. ThinCats legal structure is unclear aside from that they are an authorised representative of an Australian Financial Services License similar to Society One and Marketlend. However, Marketlend has opted for the more traditional debt structure by establishing trusts that issue tradable bonds by an independent trustee.
The Australian peer to peer market is operating in the commercial banking market which is 2123 billion of client loans according to BMI Research as of November 2013. P2P Lending remains a new concept and irregularly reported albeit growing exposure is occurring through crowd funding publicity and statements by new investors like Murdoch investor group and James Packer investor group.
Crowdfunding saw commentary from the regulatory authorities in the form of a guidance and reference in a financial system review in last quarter of 2014. The essence is that it should be encouraged however, there are significant legislative hurdles at this time and consideration should be given to making it easier to commence such endeavors.
At this time if you offer a financial product, service, loan or investment to a retail person, a credit license is needed for lending and you are required to hold an AFSL or be an authorised representative of an AFSL holder who has sufficient licenses to enable it to advise, and offer financial products to the retail market. Furthermore, if you chose to offer a product, through a managed investment scheme, you need a responsible entity or must be a responsible entity (RE) to offer the securities. In layman terms, the RE is a similar entity to a trustee. A notable exception to this includes, operating to offer to wholesale investors and offering only business loans. Each of these has it’s own idiosyncrasies.
As recent as 15 March 2015Â CBA top executive Kelly Bayer Rosmarin questioned whether peer to peer lending is driven by supply side factors in a low interest rate environment and wondered if the peer to peer model can sustain an entire cycle. This shows a lack of concern or possible complacency by the mayor banks. However other smaller or progressive banks have looked to discuss with peer to peer lenders about possible cooperation or investment.
For peer to peer lenders we welcome the benign attitude of the larger banks as it is the type of attitude that drives investors and borrowers towards this market. Australia is marketplace where the internet is a well-accepted forum for doing business and the financial services industry is already using it to develop their own businesses. This type of lending is a graduation of the electronic age of the financial services industry in Australia and here to stay.
There is talk of at least 3 new arrivals this year: Money place, Lend2fund and another that has operations offshore.
Marketlend is a business peer-to-peer lender who offers loans only to business in the form of working capital, traditional business lending and commercial property. Using intuitive software to take applications and automated proprietary software within a matter of minutes, Marketlend can complete external credit checks and rate the likelihood of loan repayment. The software is provided by third parties who offer similar solutions to government departments and public companies. A financial analysis is performed on available financials to determine debt coverage service ratios, leverage ratios and general health of the borrower. These data points, historical payment history and approximately 65 input items are used to determine the rating of the risk. Continue reading →
This is a guest post by Neil Roberts, CEO of Harmoney
About Harmoney
Harmoney is New Zealand’s first and only licensed peer to peer lending platform, founded by serial financial services entrepreneurs with several successful start-ups and exits that have created shareholder wealth in excess of $1bn. Harmoney launched in September of 2014 with NZ$100m of institutional funding, and recently announced a successful NZ$10m round of funding lead by Trade Me, the leading online marketplace in New Zealand, currently accounts for 70% of the entire country’s online domestic traffic!
The New Zealand Story
We are a small country, globally significant in so much as we are regularly the test bed for financial services innovation due to the high adoption rate of technology, Western culture and contained geography. Up until mid-2014, most New Zealanders had never heard of peer to peer lending, and the FinTech/AltFin industry was not strongly established.
Why? Dominated by four Australian owned and protected banks, New Zealand’s financial market has grown stagnant.  Our “Big-4†banks are protected by Aussie legislation known as the “four pillar†policy, which has not only allowed the creation an artificial oligopoly, but also made those four banks among the most profitable in the world – even more than their Australian counterparts. Without much in the way of serious challenge, these banks have dominated the market with neither need nor motivation to change.
It’s created a perfect storm for the introduction of peer to peer lending. The passing of the Financial Markets Conduct Act (FMCA) – a Bill that was applauded as “once-in-a-generation†(http://www.interest.co.nz/business/66116/once-generation-financial-markets-conduct-bill-passed-law) – in April last year opened the doors to a fully licensed and regulated crowdfunding and peer to peer lending industry in New Zealand.
Of a handful of known applications, Harmoney is at this stage the first and only peer to peer lending platform to be licensed. The licensing process is very thorough – and appropriately so. New verticals and business models within the financial sector will inevitably be treated with caution, both by regulators and by the public. We have long held the belief that a thoroughly audited and strictly regulated industry will be safer for customers and foster greater public trust. Continue reading →
