Page 45 - Banking Finance JANUARY 2017

ARTICLE

and due diligence compliance, Credit counseling, loan re- Crowd funding transforms saving into capital formation and
covery services at reasonable cost and as per customers` normally regulated by capital market regulator while P2P
requirement at their doorstep. fall within the purview of banking regulator that draft guide-
lines considering investors` interest and market practices
This model of funding varies from crowd funding where prevailing across the globe. Various countries regulate
various investors park their funds in any project that offer crowd funding and P2P considering their national economic
them anticipated yield as per their risk tolerance capacity. interest avoiding any contradictory legal issues.
Global Economies and P2P Lending:
Across the globe P2P lending has been regulated in five different ways which has been well depicted by table hereunder:

Regulatory Regime Countries Description
Prohibited Israel & Japan P2P lending is totally banned.
Banking Regulation France, Germany P2P lending platform is regulated as Banks due to their credit inter-
and Italy mediation function. They are required to obtain a banking license; fulfill
disclosure requirement and other such regulations.
Intermediary Australia, Argentina, P2P lending platform is required to register itself as intermediary in
Regulation Canada, New Zealand order to access the market. Other rules and regulation determine
and U.K modus operandi need to be followed by the platform (like licensing is
needed for credit or financial services).
Unregulated China, South Korea, No specific regulation is in fashion to regulate P2P lending Platform
Egypt, Ecuador and however in some cases consumer protection from unfair interest rates,
Tunisia unfair credit provision and fake advertising is in existence.
US Model U.S.A Here two level of regulation is in existence for regulating P2P lending
platform, Federal regulation through the SEC (Securities and Exchange
Commission) and State level where Platforms have to seek state-wise
approval as certain state (like Texas) outright ban the practice of P2P
lending while other states (like California) place limits on the type of
investors using the platform to lend. In case P2P platform wishes to op-
erate across multiple states, separate approval from each is required.

The US is the largest P2P
lending market in the
world by loan volume, but
the UK is 72% larger on a
per capita basis.

By the end of year 2015,
global P2P market share
has crossed approxi-
mately USD 64.00 Billion
and expected to touch
USD 1000.00 Billion by
the year 2025 at current
estimates as depicted by
the table below.

BANKING FINANCE | JANUARY | 2017 | 45

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