‘Too important to be ignored’ – The Reserve Bank of India leads up to releasing P2P lending standards

India is a major developing economy and is forecasted to see massive economic growth in the next few years. It’s a country that can’t be ignored in the 21st century and may follow the steps of China if it plays its cards right. The Reserve Bank of India has recognised the importance of P2P lending in its most recent standards assessment and looks to publish them soon.

In a 2016 consultation paper, the RBI considered P2P lending benefits to be too important to be ignored. In a more broader sense, these standards look to establish a strong regulatory framework on capital, governance, business continuity, and customer interface alongside regulatory reporting.

This recognition could be the key to truly accelerating P2P lending internationally. At this stage, the biggest market for P2P lending has been in the USA. It is amazing to see the RBI recognise P2P lending. Over the next few decades, India may rival China’s economy and even the USA. We may see P2P lending alongside this acceleration of economic growth and truly grow into the 21st century.

It’s extremely important for developing countries to begin to understand P2P lending. Additionally, it’s important for their Governments to truly recognise the importance of setting regulation and recognising P2P lending as a legitimate form of finance for small businesses and individuals.

Though, it’s just as important for every business that provides P2P lending for them to grow into other areas of the world aside from the West. This can provide access to hundreds of millions of businesses across India, China and SEA that could benefit from P2P lending.

The team at MarketLend is excited to see what comes next out of the P2P lending standards from the RBI.

A decade of deficits: Australia’s AAA rating on the rocks

In the last federal election, Australia’s AAA rating was a hot topic that was brought up by both sides of the political spectrum. Australia’s S&P rating was threatened last year, with many predicting it to fall to AA+ in 2017 or 2018. Over the last week, we’ve seen the AAA rating re-affirmed by the S&P but placed at a high-risk.


Citing a decade of deficits, the S&P has highlighted the deterioration of Australia’s financial position. If the Government isn’t able to return to surplus by the early 2020s, it will most likely lose its AAA rating and be demoted to AA+. Most investors don’t solely rely on these rating agencies when making investment decisions. S&P have made mistakes before, particularly a $2 trillion arithmetic error when reviewing the US financial position.


Though, S&P ratings almost have a larger impact on public perception of the economy. A demotion in S&P ratings will show that Australia isn’t so immune from a recession or default. We’ve avoided recession for almost three decades, and we have a generation that has never experienced the ferocity of a major recession.


In addition to this, the average Australian is stuck into a lot of debt. Household debt and mortgage debt are some of the highest in the world and housing prices have seemed to be inflated for the last decade and a half. If there is a major shift in our economic climate and many lose their jobs, these high mortgages may come back to haunt them.


This gives the S&P ratings a lot of leverage over the average Australian. Any sign of a recession or potential unemployment will see Australians quickly saving their money. This may be a self-fulfilling prophecy as we will see a subsequent decline in spending and potential unemployment as a result.


The Government really has to hit the next budget out the park, improve our financial position in the world, and ensure that we don’t see a major loss in employment. These things combined may pull us back into good standing. Australia is feeling exposed right now, and high home prices and mortgages are making the average Australian feel queasy too.

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Wealth begets wealth: Are retail investors at a disadvantage?

To invest in risky early-stage private ventures, the Government must consider you to be a ‘sophisticated investor’ that is:

1. Earning an income of over $250,000 per annum in the previous two years or

2. Having net assets in excess of $2.5 million. This means that only a small fraction of the population are able to invest in these businesses.

Not only does that provide a large amount of leverage to this small group of investors, but it also impedes new businesses that are emerging and require start-up capital.

Interestingly, this is where the Government draws a line. Retail investors are still able to invest large amounts of money to risky ventures that enter through public IPO, these tend to underperform heavily and lose many retail investors money. The huge returns to be made through investment into early-stage private ventures cannot be consistently seen in the ASX. This means that the majority of retail investors are restricted to small consistent gains or losses on the ASX.

Crowd-sourced equity funding provides one solution to this, but what if a retail investor (even someone who is earning an income of $245,000 with $2.4 million dollars in assets) wants to invest in an early-stage start-up? The Government’s position on this patronises many educated and savvy investors who simply don’t meet either of those requirements.

It would be interesting to see what the Government’s angle is on this. Are “sophisticated” investors simply those that have more knowledge about the stock market as they are wealthy already? Or do they simply have the ability to take on more risk, and everybody under $250,000 in annual income or with less than $2.5 million dollars in net assets unable to do so. Well for one, it can’t be a statement about knowledge.

Even the average finance professor at an Australian University would earn less than $250,000 and you’d expect them to have at least a basic understanding of risk and shares? If it is about wealth, it seems like a very arbitrary number. The average net-worth of an Australian household in 13-14 was $809,000, meaning that a very small proportion of people would have the requisite $2.5 million dollars worth of net assets. Much of this wealth could be inherited too, and a rich gullible investor will still face the same risks of losing much of their wealth as a poor gullible investor.

I believe that the Government needs to develop a better position on who is allowed to invest in companies. The current position is patronising to retail investors, and frankly the vast majority of Australia’s population. The Government allows us to punt, gamble, and invest in risky property assets, why is the line drawn at private businesses? Something that produces a real and meaningful asset to the Australian economy, and employs our population?

What is Responsible SME lending – Altfi Conference 2017 panel discussion

Access to Finance for SMEs is critical to the growth of Australia and its position in the world:

Small and medium sized enterprises (SME) make up a massive portion of Australia’s broader economy. SMEs hire up 70.5% of private sector employees, an absolutely astounding number, and contribute 57% of the industry value added by business. As an economy, our success is heavily related to the success of SMEs. Australian politicians realise the importance of SMEs in the economy, see the latest budget for reference. They’re attempting to decrease tax rates, and increase cheap employment options for SMEs.

SMEs have had a rough few years. The global economy has come out of recession, and there is still a lot of uncertainty in capital markets and credit liquidity. Lending has tightened over the last few years, and that has put a lot of small businesses in a position which they haven’t previously been in. A third of SME’s with external finances find it hard to access finance .
To start with, let’s look at CSEF. CSEF has a lot of promise. It requires market validation and it’s a great way to enable start-ups which end up innovating, increasing the number of jobs, and the efficiency of our economy.
In addition to this, the Government’s 20% non-refundable tax offset capped at $200k per investor provides a major incentive for Angels to get involved with accelerators and venture capital. However, P2P lending is something that isn’t really focused on.
We’ve talked a lot about the regulations surrounding P2P lending and crowd sourced equity funding. Without repeating myself, the Government has taken very slow and cautious steps when dealing with P2P lending and CSEF. P2P lending has allowed SMEs to access external finance, relatively easily as well. On Marketlend and most other P2P lenders, the marketplace system rewards SMEs who are compliant, and provide as much information as possible. It allows individual investors to diversify in what they believe in, whilst bolstering the Australian economy.
It’ll be interesting to see how the Australian Government addresses the rapid expansion of CSEF and P2P lending. It’s a balancing act. Increasing compliance and regulation results in a decrease of use within these services, whilst reducing compliance and regulation might lead to very worrying results.
First loss, provision funds,  insurance and structures which conservatively manage the investors risk are more likely to become common place after incidents like the lending club in US.
Investors are likely to expect more “skin in the game”.
During the global financial crisis we saw debt structures where the originators needed to invest amounts of 1-11% subordinated debt in prime insured mortgages that were secured, and all debt issuers requiring an audit when issuing debt.
It is not a distant thought that investors are likely to expect the same in the marketplace lending space. It usually starts from the US and then it will knock on around the world.
At Marketlend we have tried to get ahead of the curve by:
a) completing a due diligence with a large global accounting firm,
b) invest in each loan and as a result offering first loss protection on each loan,
c) increasing our provision on each loan to 1%; and
d) obtain full recourse insurance on the debt finance facilities and trade finance.

We never try to suggest we can protect investors against losses on loans, and whislt we can be diligent in our origination, processing and collections, there will always be losses.

It is lending, and lending has risks. Investors should obtain their own independent legal and financal advice prior to investing in any investment on Marketlend.

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  • On 27th February 2017, come see us at the AltFi Summit


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Precursor to Year in Review Webinar

Year in Review – Precursor – Review the milestones of Marketlend over 2016

Google Tax

Scott Morrison introduced the ‘Google Tax’ or the less exciting Diverted Profits tax on the 29th of November this year, stating that it will ensure that tax dodging corporations will be heavily scrutinised and taxed heavier if they try and dodge their tax. The tax will allow the ATO to broaden their scope and ensure that these large multi-nationals can properly be punished.This is something that a lot of Australians are frustrated with, especially SME owners that pay a 30% corporations tax. Running a successful business shouldn’t give you immunity from taxation, and that seems to be the case with the status quo at the moment.


We see a lot of successful multi-nationals enter Australia, crowd out Australian businesses and divert their income overseas to avoid any tax. You could argue that they are giving Australians jobs, sure, you aren’t wrong on that front. However, there is a major amount of money that we, as Australians, are putting into their companies.


Just because you can afford the best accountants in the world and amazing tax lawyers should not preclude you from paying tax. I think this is a bi-partisan issues that should be agreed on by both parties.


The proposal states a $200M increase in the Australian budget if tax evasion by multi-nationals is adequately prevented and the money is redirected back into Australia. As a Government that was cracked down on about this very issue, it is refreshing to see some action taken on it. It will be interesting where support lies on this tax, and how it will affect multi-nationals entering into Australia.Will it stop multi-nationals from setting up shop in Australia? If this passes, we’ll have one of the strictest laws on this issue in the world. Google has moved billions of dollars to Bermuda, it’s under pressure from Indonesia to pay its taxes, and it’s proud of how the company avoids taxes.Whether this is okay or not depends on what you believe.

Irish tax law is the a major way to avoid corporate tax liability, using payments between related entities in corporate structures to move payments across from a higher-tax country to one with lower jurisdiction.

A look into supply chain finance

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A look into supply chain finance

Recently, supply chain finance has become a phrase that is common-place within the financial technology dialogue. It’s a bit different to many other ways of finance, in that it isn’t as simple as say a loan. However, it’s quite possibly one of the most powerful tools to increase the efficiency within a small or large business. Many consulted companies have looked into utilising supply chain finance as a way to increase their client’s efficiencies at every step of the supply-chain.

Supply Chain Finance is rather simple when you break it down into its core elements. It’s the movement of goods from the supplier to the buyer, financed by an external party. This finance creates a liability in the buyer’s account, which is typically paid off after the goods have been utilised or sold.

In more complex terms, it isn’t a loan/debt in conventional terms. It is an extension of the buyer’s Accounts Payable terms. It allows a buyer to leverage short-term credit, in order to ensure that there is enough working capital flowing through his business. In other words, it ensures that the funds that you can use to grow your business aren’t locked up in a delivery truck or your warehouse.

There is a lot of importance on freeing up cash that is trapped within a supply chain. It’s a delicate skill, but it can provide serious benefits to a business. For one, you’re able to have peace of mind when considering your transactions for that month. It is a lot nicer to know that you’ll be able to safely invest in new infrastructure or technology without risking procurement of your products.

There’s a misconception that supply-chain finance is only for large companies. This is incorrect. With the increases in financial technology, supply chain finance is becoming increasingly more available to small to medium enterprises. This can really improve the competitiveness of Australian businesses if they begin to utilise these tools. Having more cash-flow is arguably more important for a SME compared to a large organisations. One of the reasons why many businesses fail in the early days is a lack of cash-flow. By utilising supply chain finance, businesses are able to consistently grow whilst avoiding any major cash-flow issues.

Does Marketlend to supply chain financing? Definitely

Since Marketlend’s inception in December 2014, Marketlend has been providing the supply chain finance solution to small and medium businesses.In recent times, this product has also had the benefit of insurance protection on the solvency of the underlying buyer.

Using market place lending technology Marketlend has been able to offer a cost-effective and a reducing administrative solution to a number of buyers and also to some suppliers to offer their buyers.

When combined with debtor finance, the business can obtain a full solution with 150 days credit. For example,  Marketlend pays the supplier, provides 90 days terms to the buyer and subsequently purchases invoices the buyer who has issued to its underlying customer to pay for the amounts have been paid on 60 days terms.

Not only does the business obtain credit terms that allow them to make better use of their funds, but it also reduces the business administration activities and reduces the need for their collections resources.

Check out more at https://app.marketlend.com.au/supply-chain-finance/ or hear Marketlend explain it in an animated interview at the above link.