An “innovative” e-citizenship programme may have contributed to the boom in the number of peer-to-peer lending platforms which are headquartered in Estonia.
There are 16 P2P platforms based in Estonia, specialising in everything from consumer credit and business loans, to land financing. Two of Europe’s largest crowdlending platforms – EstateGuru and Bondora – are based in the country, as well as several other major players such as Iuvo Group and CrowdEstate.
Read more: Estonian lenders report record P2P loan growth
Oliver Gadja, executive director of Eurocrowd, told Peer2Peer Finance News that Estonia’s e-citizenship law may have contributed to the fintech boom in the Baltic state.
“The innovative e-citizenship of the Estonian government may have it made easier to set up business in Estonia, while in Germany company law is more restrictive,” Gadja said.
He noted that P2P lending has only been regulated in Estonia since 2015, when the Creditors and Credit Intermediaries Act came into force. This means that some platforms such as Brickly, Investly and Kreditex – which were founded pre-2015 – had a chance to establish themselves before they had to deal with the administrative burden of regulatory compliance.
Read more: Estateguru gains pan-EU crowdfunding licence
A spokesperson for Estonia’s Finantsinspektsioon (FSA) said that “bringing the [P2P] sector under public financial supervision is still an open and ongoing process in Estonia and Europe.“
At present, just three P2P lenders and two crowdfunding platforms are formally regulated by the FSA, but all of these fintech lenders will have to become regulated under the recently-introduced European Crowdfunding Service Provider Regulation (ECSPR). The ECSPR rules were introduced in November 2021, and all nationally licensed crowdfunding and P2P lending platforms must attain an ECSPR licence by November 2023.
“All crowdfunding businesses have to apply for a crowdfunding authorisation by 10 November this year at the latest if they allow private individuals and businesses to lend or invest in crowdfunding projects owned by a company,” said the FSA spokesperson.
Read more: ESMA updates rules on SPVs in crowdfunding and P2P
“After that date they may no longer operate without an authorisation from Finantsinspektsioon.”
As this pan-European P2P regulation moves forward, it will become easier for EU-based P2P platforms to seamlessly enter into new markets. However, Estonia’s e-citizenship law means that the country is likely to retain its popularity with Europe’s innovators and start-ups.
