Online lending has reached a global dimension, spreading from the US, passing through Europe and reaching Asia. Although they are very different markets, the background which facilitated the emergence of this phenomenon is similar everywhere: many businesses and individuals face difficulties to access credit from banks which have strict requirements, however, thanks to modern technologies and the internet they can now connect directly with national and international investors willing to lend them the needed capital, through dedicated platforms. The same story also took place in South Korea, where there is a growing online lending market.
The Korean online lending market is so promising, that, a few months ago, a Silicon Valley venture capital firm has invested in one of the leading P2P portals. Other local players are also looking outside of Korea, to nearby countries, like China and Malaysia, to form partnerships and expand their business’.
However, the environment is not yet optimal for P2P lending businesses to grow and develop. Some local actors are pointing to the fact that specific regulations for the sector are missing. Currently P2P Lending platforms are considered “Lending Businesses” which makes them subject to a high taxation - 27.5% tax on total operating profits -, that some say it is too high for small and young companies like P2P portals. Also, while the banking sector has an integrated system to share information on the credit of all debtors, such thing does not exist for online lending platforms, which reduces the level of accuracy of their credit information. Other stakeholders are lamenting the lack of adequate protections for consumers engaging in online lending activity. As a consequence, some players are calling for the Government to develop a specific regulation that would allow the sector to tap its full potential and operate efficiently and effectively.
Nevertheless, not everyone agrees on the need of specific regulations for the sector: some say that the answer is fewer regulations, not more. Whatever the position of the Government, we can be certain that the online investing sector in South Korea is developing quickly and, after equity crowdfunding was regulated, it won’t pass a long time before the Government takes action on it.
Eun-Jee, P.,Hee-Jin, K. (2015). Peer-to-peer lending takes hold in Korea. Korea JoongAng Daily
Hee-Jin, K. (2015).61 bills passed to boost economy. Korea JoongAng Daily
Photo credit to: hjl
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem and she works also for the European Crowdfunding Network.