On 31 August 2020, the Mauritian Financial Services Commission ("FSC") published the licensing criteria for Peer-to-Peer ("P2P") lending. Prior to this, P2P Ooperators were operating under the regulatory sandbox licensing.
The Financial Services (Peer to Peer Lending) Rules 2020 came into force on 15 August 2020.
What is P2P lending?
P2P lending is an emerging Fintech practice that enables a person to lend funds through an online portal or electronic platform, whereby a P2P operator facilitates the access to finance by matching borrowers and lenders on its online platform.
The three important pillars of P2P lending
- A platform, operated by a P2P operator that is a corporate body established in Mauritius;
- A borrower with a detailed project that needs financing; and
- A lender agreeing to provide funds in its own name.
How does P2P lending operate?
A P2P operator will consider a request to borrow from any person provided that the funds being sought by the person are applied for to finance a project. The P2P website will prominently disclose a description of the borrowers' project and funds will be made available to borrowers only after the required total funding has been pooled or raised for any project. This means that if the borrower does not obtain 100% of the funds, it does not get any of the money.
Once a lender agrees to provide funds in its own name, the lender and the borrower enter into an agreement through a P2P lending platform operated by a P2P operator. P2P operators must provide a cooling off period of two business days to borrowers and lenders during which they may cancel their written agreements without the imposition of any penalty.
Limits and restrictions of P2P lending
- The borrower
The following entities cannot apply for a P2P lending licence:
- A collective investment scheme and closed-end fund, as defined in the Securities Act 2005;
- A public listed entity or any of its subsidiaries;
- A person that proposes to access a P2P lending platform for further lending to other persons; and
- Any other scheme as may be determined by the FSC.
- The lender
The activities of a lender on a P2P lending platform must exclude deposit taking business, in any form.
- The P2P operator
The P2P operator has no carte blanche in regards to the activities it can undertake on the P2P lending platform. It is restricted from carrying out the following activities in its own name:
- Deposit taking business, in any form;
- Lending; and
- Providing or arranging for any credit enhancement or guarantee.
- The amount
This limit does not apply to sophisticated investors (as defined in the Securities Act 2005) when they lend in any other currency through P2P operators to borrowers that are not resident in Mauritius.
It is to be noted that the reimbursement period for the lending through P2P lending platforms must not exceed 84 months.
Obligations of the P2P operator
There is an exhaustive list of obligations that the P2P operator has to fulfil:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.