Securities and Exchange Commission of Pakistan (SECP) is amending its regulations on non-banking finance companies (NBFC) to provide a framework for peer-to-peer (P2P) financing, as it works on several other digital-related rules to support the fintech ecosystem. These initiatives are inspired by its inaugural regulatory sandbox cohort.
The P2P framework was proposed by a participant in SECP’s regulatory sandbox, which has received “encouraging” feedback from lenders and borrowers alike. Under the proposed rules, an existing licensed NBFC will be allowed to operate a P2P financing platform subject to regulatory requirements. This framework will also pave the way for policies for mutual fund digital distribution and robo-advisory. The regulator did not disclose details on the latter frameworks.
The first cohort of the sandbox was accepted in 2020 at the onset of the global coronavirus pandemic. Six entities – a digital General Takaful provider, a digital insurance brokerage, a P2P lending platform, a mutual fund distribution and robo-advisory platform and an equity crowdfunding platform – underwent a six-month testing phase which led to formulation of these new upcoming policies.
“Takeaways from [the] testing also enabled SECP to develop rules for micro and digital-only insurers. Post-public consultation, these rules are currently in the final stages of approval,” the SECP said.
The regulator has shortlisted participants for the second cohort of the regulatory sandbox program, with testing period lasting between six to nine months. It is understood that SECP is expecting to open application for the third cohort sometime in April.
An ardent proponent of Islamic finance, SECP has consistently designed its policies to cater to Shariah compliant structures and providers. It is expected that the upcoming rules will also accommodate and apply to Islamic fintech solution providers. There are eight fintech start-ups in Pakistan which offers Shariah compliant solutions as at the 25th February 2022, according to the IFN Islamic Fintech Landscape.