sexta-feira, 11 de maio de 2018

PEER TO PEER LENDING NOW LEGAL IN BRAZIL



Central Bank resolution n. 4.656/2018 has created a new kind of financial company in Brazil, called interpersonal lending company, specialized in intermediating loans exclusively through electronic platforms.

This has been reported as the legalization of peer to peer loans in Brazil. Which it is. But not exactly.

The new rules will certainly open new markets for technology in the Brazilian financial system and, hopefully, will bring much needed competition to the banking environment.

However, the new P2P lending companies are still subject to previous approval by the Brazilian Central Bank.

What are the new P2P Loan companies and what is in it for the Fintechs?

The interpersonal lending company (“sociedade de empréstimo entre pessoas” or SEP):
a) Are a financial institution, regulated by the Brazilian Central Bank (so, not a website run from a garage);
b) Must have at least 1 million reais (about 290K USD) in equity;
c) Are to be specialized in intermediating loans between users of an online platform (the users could be individuals or companies);
     d) Can only do business through the online platform;
     e) Must have systems in place to provide:
e.1)     Accurate credit ratings;
e.2 Management and recording of the contracts, including confirmation of signatures, confirmation of terms, etc.

Items D and E are the cause of the buzz.

The fact that the loans can only take place through electronic platforms is already forcing the players in the market to adopt software solutions that will allow them to attract and process the transactions in a safe and expedite manner.

Moreover, tools for credit rating and document processing will likely have to be added to the system.

There is a lot of space for innovation in this regard. The Brazilian civil code is not clear on the validity of electronic signatures and Brazilian jurisprudence on the matter is evolving. A lot of companies are experimenting with the use of “selfies” as signature, as well as other smart phone applications.

Foreign ownership of these P2P lending companies will be subject to special approval by the Brazilian Central Bank, following the lines of the special approval needed for foreign banks to operate in Brazil. Because of that, my bet is that foreign investors will celebrate Joint-Venture agreements with the SEP companies, in order to provide technology and maybe a trademark, while not holding equity in the operation

Tech companies interested in the subject are encouraged to check my post: Selling software and services to Brazil.




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