Yes, peer-to-peer (P2P) lending is legal in Singapore. It is regulated by the Monetary Authority of Singapore (MAS) under the P2P Lending Regulatory Framework introduced in 2020.
Who can engage in P2P lending in Singapore?
Individuals:
- Must be at least 18 years old
- Have a valid NRIC or FIN
- Not an undischarged bankrupt
Businesses:
- Must be a Singapore-registered company
- Have a minimum paid-up capital of S$500,000
- Not a financial institution
What are the requirements for P2P lending platforms in Singapore?
P2P lending platforms must:
- Be licensed by MAS
- Maintain a minimum capital of S$1 million
- Have a minimum of two directors
- Implement measures to protect investors, such as due diligence on borrowers and a risk management framework
What are the risks of P2P lending in Singapore?
- Default risk: Borrowers may fail to repay their loans, leading to losses for investors.
- Interest rate risk: P2P loans typically have higher interest rates than traditional bank loans, which can increase the risk of losses if interest rates rise.
- Liquidity risk: P2P loans are not as liquid as traditional bank loans, making it difficult to access funds quickly.
- Regulatory risk: The P2P lending industry is still evolving, and regulations may change in the future, which could impact investors.
How to choose a P2P lending platform in Singapore?
When choosing a P2P lending platform in Singapore, consider the following factors:
- Reputation: Research the platform’s track record and customer reviews.
- Fees: Compare the platform’s fees, such as origination fees, management fees, and late payment fees.
- Interest rates: Consider the interest rates offered by the platform and compare them to other options.
- Risk management: Review the platform’s risk management framework and due diligence process for borrowers.
- Customer service: Ensure that the platform provides adequate customer support.
Conclusion
P2P lending is a legal and regulated form of investment in Singapore. However, it is important to be aware of the risks involved and to choose a reputable platform carefully. By following the guidelines above, investors can increase their chances of success in P2P lending.
