Securities and Exchange Commission of Pakistan (SECP) has given approval to the launch of a peer-to-peer (P2P) lending platform under the first cohort of its technology-driven initiative ‘Regulatory Sandbox’.
According to the press release by SECP, this move to launch the P2P lending platform has been made in order to support and encourage the financial technology revolution in Pakistan. “Peer-to-peer lending is an innovative, alternative digital platform that connects borrowers with individual lenders, who come together to meet the former’s loan requirements.”
The statement further says, “Peer-to-peer lending helps borrowers give out short-term loans that enable small and medium enterprises (SMEs) to scale up their businesses, eventually allowing them to qualify for bigger bank loans.”
The grant of approval by the SECP for testing and experimenting with a peer-to-peer platform is also attributed to developing the ecosystem for SME financing so that higher growth prospects may be achieved and so new employment and business opportunities may be generated.
“During the testing phase, the platform shall operate within pre-defined parameters and is subject to certain terms and conditions. Further, specific eligibility criteria shall also apply to the selection of each lender/borrower.”
“These terms and conditions have been imposed to address the inherent risks involved in operating such platforms in the absence of a regulatory framework. However, these terms and conditions shall be reconsidered parallel to the results of the experimentation stage,” the press release said.
The statement further adds that it will help SECP devise a highly needed enabling regulatory framework.
The SECP ‘Regulatory Sandbox’ is particularly a framework for accommodating the provision of financial services that power new technologies.
Furthermore, it allows FinTech firms to test their services and facilitate the adoption of new technology in a live environment within a limited, well-defined scope.