Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222679
Authors: 
Nemoto, Naoko
Huang, Bihong
Storey, David J.
Year of Publication: 
2019
Series/Report no.: 
ADBI Working Paper Series No. 912
Abstract: 
Globally, the regulation of P2P lending has evolved significantly in recent years, with mostly beneficial effects on the diversification of funding for individuals and corporations. Regulatory responses have varied greatly between countries, and the characteristics of the markets that have emerged vary as a result. The purpose of this paper is to describe and evaluate the range of P2P lending systems on offer to small and medium-sized enterprises (SMEs) in several countries, considering different regulatory regimes. In some countries, there are problematic incentives for platforms that rate credit and originate loans without holding the risk of these loans. In addition, when investor returns are guaranteed by platforms, investors have no incentive to distinguish among risk categories. In several countries, notably the People's Republic of China, P2P platforms have engaged in fraudulent behavior and Ponzi-like schemes. On the other hand, stringent regulation in the United States has excessively impeded new entrants from providing competition to established platforms. Regulators should be mindful of these risks and others, while also seeking to capitalize on the benefits that the sector offers for providing new funding opportunities to SMEs. In our view, the United Kingdom can be suggested as an effective model to follow because of its tailor-made and flexible regulation.
Subjects: 
fintech
P2P lending
regulation
JEL: 
F34
F38
G23
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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