Peer To Peer Lending In Uruguay

Peer to peer lending is a relatively new concept in Uruguay, but its growth has prompted the first signs of a regulatory framework.

Like other countries in South America, Uruguay has seen a spurt in peer to peer lending over the past five years, as entrepreneurs developed this type of non-traditional platform, and new players came into the market. It has offered different investment options, rates of return, business models and a wide variety of assets to invest in.

As this type of business consolidates and becomes more popular, its growth is hand-in-hand with the evolution of specific regulations for this type of application.

Now, the Central Bank of Uruguay has begun exploratory work for future regulations, aimed at establishing financial transparency and a clear means of identifying who is behind the lender and the borrower.

As the peer to peer lending market is quite embryonic, processional expertise is recommended to make sure the transactions are compliant and in keeping with existing and developing regulations.

Any new lending schemes in this field must be registered with the Central Bank of Uruguay, and payments must be legitimate and in line with existing regulations for the Prevention of Money Laundering.

Peer to peer lending process

The boom in peer to peer lending is because of an unmet need. Traditionally, borrowers wanting funds must go through a long, complicated, and expensive application and vetting process by banks or credit companies before they get the go-ahead to a loan. Conversely, those who had surplus funds, and were looking to place it somewhere with a good return on capital, had limited options.

By contrast, peer to peer lending via an online platform which has no intermediary process. The platforms administrator is not lending his or her own money but simply providing a 'matchmaking' service between those who want to borrow and those who want to lend. A borrower in need finds a lender with money to loan, and the deal is made via a virtual space where supply and demand are met. This provides an obvious reduction in costs, there being no overheads on administration, and makes for a faster process.

From the lenders' perspective, they can manage their money with better returns, avoiding the inter-mediator costs that make the rate...