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Developing P2P On-line Loans, Financial Supervisory Commission Must Reform its Mindset

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 Developing P2P On-line Loans, Financial Supervisory Commission Must Reform its Mindset

China Times Editorial (Taipei, Taiwan, ROC)

March 25, 2017

Translation of an excerpt

In recent years, the Mainland P2P platform for on-line loans has rapidly emerged; this is a credit extension mode different from traditional banking operations. It uses technology to solve the gap in lending information in order to satisfy the needs for funds of individuals or businesses that could not secure loans from the banking system. At the same time, it fills the gap in the existing lending market. The P2P on-line lending market is an important long-term trend in technology for financial services; however, Taiwan has not been able to catch up.

In 2015, LnB Market was established, the first P2P on-line loan platform in Taiwan that secured Silicon Valley funding. To date, operators that have emerged with some name recognition number fewer than ten. However, they have attracted very little attention from angel investors or venture capitalists. For a government that has talked loudly about pushing for the development of technology in financial services, it is a great irony.

Innovation seems to have virtually become the panacea of economic sustainability of the current government. The irony is, while we encourage businesses and individuals to innovate and start up businesses, funding to assist innovation has not caught up; it has remained in the old-thinking that "using banks to support businesses,” following the traditional financial credit extension mode to assist the newly-started businesses to secure capital. If we have to say that it does exist, the most we could say is about the government’s role in setting up a fund for industrial innovation and transformation, or the setting up of a fund for the development of technology in financial services by the cartels themselves. This is nominal at best, an approach totally in disregard of market mechanisms.

The majority of newly-started businesses still rely on other channels to secure the necessary capital for operations, and P2P on-line platforms are one of channels commonly used to raise capital. For example, the first P2P on-line loan platform to be listed on the United States’ stock market is Lending Club. Since its inception, it has loaned out US$15 billion, and has successfully assisted many start-ups to head down the right track. This in fact has already given us an enormous revelation.

If the government wants to encourage newly-started businesses to develop, it cannot simply draw a pie in the sky. How to provide channels for raising capital from diverse sources, and allow the new entrepreneurs who are in dire need of capital to efficiently and conveniently secure capital, and assist operators in financial technology, such as P2P on-line loan platforms, to play a competent role of an intermediary, introducing market mechanisms is the most important.

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