First licence issued for peer-to-peer lending

The Financial Markets Authority (FMA) has issued its first licence for a new peer-to-peer lending service, but outlined a heightened risk profile for lenders seeking higher returns.

Up to $2 million has been set for the borrower ceiling, while regulations covering crowdfunding, to a similar level, are still being worked on.

The Financial Markets Authority has licensed Auckland-based Harmoney as the first intermediary, between lender and borrower, under the provisions of the Financial Markets Conduct Act 2013.

The FMA's director of compliance, Elaine Campbell, said the peer-to-peer licensing was part of FMA's brief to promote new capital-raising opportunities in New Zealand; also part of the Government's business growth agenda.

''The service has great potential but lenders should also realise the risks are greater than putting money in a bank.

''Lenders can lose money or not get the interest they expect if borrowers fail to repay the loans,'' Ms Campbell said.

She said under the regulations, borrowers were limited to raising no more than $2 million in any 12-month period through peer-to-peer lending services.

''This limit applies to both business and consumer borrowers, although individual service providers may impose lower limits on the amount that may be borrowed,'' she said.

The regulations do not impose any limits on the amount lenders can lend, although some service providers may impose limits.

''Lenders should remember they may not be able to withdraw their money at short notice,'' Ms Campbell said.

Harmoney, which operates an online platform, will match individual borrowers, rather than businesses looking for capital, with lenders, and determine the interest rate on the loan based on the credit risk of the borrower.

The FMA was still reviewing four other potential licences, including three equity crowdfunding applications and one for both peer-to-peer and crowdfunding platforms, BusinessDesk reported.

''We do expect we will be in a position to be licensing an equity crowdfunding platform quite shortly, we're just working through some final issues with the applicant,'' she said.

Those still waiting to hear from the regulator on their equity crowdfunding applications include Wellington-based PledgeMe, the crowdfunder looking to expand into equity offerings, Armillary Private Capital, which has partnered with the UK-based Crowdcube, and Auckland-based Snowball Effect.

Lendit, which counts entrepreneur Selwyn Pellet as an investor, has applied for both licences.

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