How significant has P2P risk been reduced in China, and how are regulators around Asia responding to this new form of lending?
Chinese P2P lenders are improving in quality as fewer platforms defaulted in 2016. According to a recent report from Diyiwangdai, a Chinese P2P company, 938 P2P platforms defaulted in 2016, 218 fewer than in 2015.
The Chinese P2P market is one of the largest in the world. The total transaction through Chinese P2P platforms in 2016 was 2.8 trillion yuan, 137.6% up from 2015. Ezubao, one of China's highest-profile P2P lending sites, was involved in a $7.6 billion Ponzi scheme in early 2016.
CBRC, MIIT (Ministry of Industry and Information Technology), MPS (Ministry of Public Security) and CAC (Cyberspace Administration of China) jointly issued a regulation on P2P activities in August 2016. Under the new rules, online third-party P2P platforms cannot collect deposits or set up asset pools. Any form of securitization of the loans is not allowed either. The regulations also set an upper limit on loans to individuals on a single platform to be 200,000 yuan, while the total amount an individual can borrow through all platforms is capped at 1 million yuan.
In October 2016, the Chinese state council also issued official guidance on the fintech industry to control the risk derived from financial innovations. The new regulations prohibit activities such as P2P platforms setting up cash pools, raising funding illegally, and providing loans. Property developers are also prohibited from providing financial services to their clients using P2P platforms.
Outside of China, financial regulators around Asia have been looking at how to handle the growth in Asian P2P activity. Recently, Indonesia’s OJK (Otoritas Jasa Keuangan) released guidelines on financial technology companies (fintechs). Under the new rules, all fintechs will have to obtain a business license from the OJK, and must have at least 1 billion rupiah to register. While this represents a big step in the Indonesian P2P space, the OJK did not specify maximum interest rates for P2P loans.
In Singapore, the MAS (Monetary Authority of Singapore) has been proactive in promoting fintech growth within the country. Last summer, the MAS stated that it was looking to improve access to crowd-funding for SMEs. In order to the protect potential investors, the MAS will require crowd-funding firms to disclose key risks of investments and make sure investors have understood those risks.
Similar to Indonesia, the Reserve Bank of India (RBI) aims to regulate the P2P industry by registering lending platforms as non-banking financial companies. Under the proposed regulations, Indian P2P companies should act only as intermediaries, meaning that they should not keep the capital of lenders as deposits.