Post by dracon on Aug 2, 2018 20:32:58 GMT 4
Peer to peer lending is a relatively new concept in Uruguay, but its growth has prompted the first signs of a regulatory framework.
Like other countries in South America, Uruguay has seen a spurt in peer to peer lending over the past five years, as entrepreneurs developed this type of non-traditional platform, and new players came into the market. It has offered different investment options, rates of return, business models and a wide variety of assets to invest in.
As this type of business consolidates and becomes more popular, its growth is hand-in-hand with the evolution of specific regulations for this type of application.
Now, the Central Bank of Uruguay has begun exploratory work for future regulations, aimed at establishing financial transparency and a clear means of identifying who is behind the lender and the borrower.
As the peer to peer lending market is quite embryonic, processional expertise is recommended to make sure the transactions are compliant and in keeping with existing and developing regulations.
Any new lending schemes in this field must be registered with the Central Bank of Uruguay, and payments must be legitimate and in line with existing regulations for the Prevention of Money Laundering.
Peer to peer lending process
The boom in peer to peer lending is because of an unmet need. Traditionally, borrowers wanting funds must go through a long, complicated, and expensive application and vetting process by banks or credit companies before they get the go-ahead to a loan. Conversely, those who had surplus funds, and were looking to place it somewhere with a good return on capital, had limited options.
By contrast, peer to peer lending via an online platform which has no intermediary process. The platforms administrator is not lending his or her own money but simply providing a 'matchmaking' service between those who want to borrow and those who want to lend. A borrower in need finds a lender with money to loan, and the deal is made via a virtual space where supply and demand are met. This provides an obvious reduction in costs, there being no overheads on administration, and makes for a faster process.
From the lenders' perspective, they can manage their money with better returns, avoiding the inter-mediator costs that make the rate more expensive and lowers the return for the investor. The borrower has better rates, and access to money they could not otherwise access, since many of the borrowers are outside the traditional financial system. Costs for the borrower also decrease, since the business relationship is direct, between the lender and the borrower, with no intermediary overheads.
From a risk perspective, the investor assumes the risk of default, but decides in advance what type of borrower he or she is willing to take on, and what rates they want to charge. The borrower will obviously look for a competitive rate. The online platform charges commission, and investors receive the interest paid by the borrowers, once these expenses are deducted.
Like other countries in South America, Uruguay has seen a spurt in peer to peer lending over the past five years, as entrepreneurs developed this type of non-traditional platform, and new players came into the market. It has offered different investment options, rates of return, business models and a wide variety of assets to invest in.
As this type of business consolidates and becomes more popular, its growth is hand-in-hand with the evolution of specific regulations for this type of application.
Now, the Central Bank of Uruguay has begun exploratory work for future regulations, aimed at establishing financial transparency and a clear means of identifying who is behind the lender and the borrower.
As the peer to peer lending market is quite embryonic, processional expertise is recommended to make sure the transactions are compliant and in keeping with existing and developing regulations.
Any new lending schemes in this field must be registered with the Central Bank of Uruguay, and payments must be legitimate and in line with existing regulations for the Prevention of Money Laundering.
Peer to peer lending process
The boom in peer to peer lending is because of an unmet need. Traditionally, borrowers wanting funds must go through a long, complicated, and expensive application and vetting process by banks or credit companies before they get the go-ahead to a loan. Conversely, those who had surplus funds, and were looking to place it somewhere with a good return on capital, had limited options.
By contrast, peer to peer lending via an online platform which has no intermediary process. The platforms administrator is not lending his or her own money but simply providing a 'matchmaking' service between those who want to borrow and those who want to lend. A borrower in need finds a lender with money to loan, and the deal is made via a virtual space where supply and demand are met. This provides an obvious reduction in costs, there being no overheads on administration, and makes for a faster process.
From the lenders' perspective, they can manage their money with better returns, avoiding the inter-mediator costs that make the rate more expensive and lowers the return for the investor. The borrower has better rates, and access to money they could not otherwise access, since many of the borrowers are outside the traditional financial system. Costs for the borrower also decrease, since the business relationship is direct, between the lender and the borrower, with no intermediary overheads.
From a risk perspective, the investor assumes the risk of default, but decides in advance what type of borrower he or she is willing to take on, and what rates they want to charge. The borrower will obviously look for a competitive rate. The online platform charges commission, and investors receive the interest paid by the borrowers, once these expenses are deducted.