The Securities & Exchange Commission of Pakistan (SECP) notified an S.R.O.436(I)/2022 to issue draft amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008.
According to the new regulations, “P2P Services” means the services provided by a lending NBFC permitted under these regulations for facilitating P2P lending transactions through the P2P lending platform and will include the provision of the platform and activities provided for P2P lending.
As per the notification, “Peer-to-Peer Lending” shall mean the extension of loans by the lender to the borrower through the P2P Lending Platform whereas the Platform would be an intermediary providing P2P service through an online medium or otherwise to the participants who have entered into an arrangement with that platform to lend or to borrow money.
As per the regulations, a lending NBFC, having a valid license, may apply to the Commission for permission to operate as a P2P Service Provider, subject to the following requirements:
It shall have a minimum additional equity of Rs. 20 million or such higher amount as the Commission may notify, over and above the minimum equity requirement as specified under schedule I of Non-Banking Finance Companies and Notified Entities Regulations, 2008.
It shall have the necessary demonstrable technological, entrepreneurial, and managerial resources to offer such services to the participants. It shall have a viable business plan for conducting the business as P2P Service Provider. It shall submit a plan for the implementation of a robust and secure Information Technology system. It shall comply with any other condition as may be required by the Commission.
The scope of activities of the P2P service provider revealed that it would act as an intermediary providing an online marketplace or platform to the participants for direct lending and borrowing. It will contribute at least 15 per cent or such a higher percentage as it may agree with the lenders in each loan disbursed through the platform provided that the agreed loan contribution shall stand at par in rights, terms of recovery, and repayment to lenders.
A P2P service provider will store and process all data relating to its activities and participants on hardware, within Pakistan or as permitted by the Commission and undertake due diligence of the Participants; undertake credit assessment and risk profiling of the borrowers, disclose it to the lenders and provide advice relating to P2P services on the credibility of borrowers, determining the creditworthiness of the borrowers, extending a loan to borrowers and determining the price of transactions for users on its platform.
It will lend money to borrowers/participate in the transaction and facilitate disbursement and repayment of loan amount and determine the terms of finance including its extension, renewal, etc.
According to the SECP regulations, a P2P service provider will require the prior and explicit consent of the participant to access its credit information; and establish systems and controls for maintaining accurate and up-to-date records of investors’ monies held, disbursed, recovered, income, and expenses charged, etc.
The aggregate loans taken by a borrower at any point of time, across all P2P Lending Platforms, shall be subject to a cap of Rs. 1,000,000 whereas the exposure of a single lender to the same borrower, across all P2P Lending Platforms, shall not exceed Rs. 500,000. The maturity of the loans shall not exceed 12 months and lenders shall be high net worth persons having a net worth of at least Rs. 15 million excluding personal residence.
The eligibility for borrowers shall be assessed on factors including but not limited to purchase history with distributors/suppliers, satisfactory-good repayment history (Credit Bureau Services), Satisfactory-Good market reputation, and business operating history of one year, and prices for the transactions shall be determined based on categories, characteristics, credit scoring of each borrower, etc. and shall be provided to the lenders for decision making, the SECP added.
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