Keep p2p lending afloat with tailored regulations

THE first potential default of a peer-to-peer (p2p) loan in Singapore has brought to the fore impending regulations on this fledgling S$15 million market. What the industry fears are tight rules that will stifle the growth of this nascent market. Whilst it is understandable that rules are necessary, measures introduced should be tailored to grow the p2p lending business sustainably.

The p2p platforms matching borrowers and lenders are vital to small businesses facing cashflow problems and finding bridging loans hard to come by. If managed right, they benefit struggling small businesses which can turn receivables, for example, into immediate cash. For the retail investors seeking higher interest income, regulations provide them a form of protection.

In Singapore, the p2p market is currently not regulated under the Securities and Futures Act (SFA). What are issued in p2p transactions are promissory notes, which are not considered debentures under SFA for now. And according to one p2p lender, as long as the notes issued have a face value of at least S$100,000 and mature in 12 months or less, borrowers do not need to issue a prospectus.