9 Jul 2014

Peer-to-peer lending licence for NZ

10:41 am on 9 July 2014

The Financial Markets Authority has issued its first ever licence for a peer-to-peer lending platform, creating new capital-raising opportunities for small and medium-sized enterprises in New Zealand.

Harmoney Limited is the first to be licensed, while other operators are awaiting FMA approvals.

Harmoney's online platform operates much like a dating service, matching lenders to borrowers, but with a regulatory framework to govern the integrity of its management, systems and procedures.

Harmoney chief executive Neil Roberts said peer-to-peer lending is a win-win for borrowers and lenders, providing a great deal of flexibility for market participants.

"A person investing should be able to get significantly more than they can get anywhere else as a retail investor in terms of a fixed interest and fixed return and that will pay you a bit of principal back and a bit of interest every single month sizing down to zero."

Mr Roberts said analysis suggests that on average it should be 12 percent, compared to say term deposits which get 3 - 4 percent.

He said it was a different risk though because investors and lenders would be taking the position of the bank.

Mr Roberts said if a loan is not paid back then the person investing will have to take that loss.

But he said an average loan of say $15,000 would be split into very small packets of say $25. Mr Roberts said they want to encourage people to have diversity in who they are investing in, so they have a small amount of each loan as a way of mitigating the risk and predict the return.

FMA director of compliance Elaine Campbell said the licence only covered Harmoney and its lending platform. It didn't in anyway protect lenders from the usual risks associated with investments of this kind, though there were limits on how much could borrow.