Is Peer-to-Peer (P2P) Lending Legal in Singapore?

Last updated on September 12, 2025

Are you a business owner intending to get a loan? Building a business often comes with barriers such as bureaucracy, lengthy processes, and inflexible bank lending terms. This is why, for some entrepreneurs, getting a traditional loan from a bank can be difficult.

In contrast, peer-to-peer (P2P) lending, an alternative source of funding, provides an attractive option. P2P lending is typically done through an online platform that connects private investors to businesses or individuals seeking loans.

For investors, the high returns that P2P lending offers can be appealing, though P2P lending comes with its own risks. If you are a business owner or an individual thinking of borrowing money through P2P lending or investing money in P2P lending, this article is for you.

This article covers:

What is Peer-to-Peer (P2P) Lending?

P2P lending allows private individuals (investors) to lend money directly to other private individuals or businesses (borrowers). The borrower then commits to repay the loan at pre-determined time intervals and interest rates. Examples of P2P lending platforms licensed by the Monetary Authority of Singapore (MAS) include Kilde and Funding Societies.

P2P lending is different from traditional bank lending, which tends to be more stringent and has a longer loan approval process. This is because banks must be more careful with what they invest in as the source of their funds is from depositors. However, interest rates for the loan are typically higher in P2P lending.

P2P lending allows investors to directly connect with borrowers by giving investors a considerable amount of control to review loan applications, assess the borrowers’ ability to repay the loans, and make informed decisions on whom they should lend their money to. This differs from investing money with a bank, which is typically done through financial products, which include investment funds and structured products. The performance of financial products depends on market indices, stocks, bonds, commodities, currencies, interest rates, or a mix of these, typically chosen by the bank to meet your investment objective. Therefore, P2P lending gives investors a lot more leeway to choose what to invest their money in as compared to investing in financial products through a bank.

However, when it comes to P2P lending, there is always a risk that the borrower fails to pay up. Therefore, it is crucial that investors do a thorough check on the prospective borrower before lending money to them, as the onus is on them to decide which borrower to lend money to.

Is P2P lending Legal in Singapore?

P2P lending is permitted in Singapore, but is subject to MAS regulations (discussed below) due to its inherent risks. Many P2P loans are unsecured, and it may not be clear at first glance as to each borrower’s ability to repay the loan. If the borrower defaults on the loan, it is possible that investors may never get their money back.

What are the Regulatory Guidelines for P2P lending in Singapore?

Securities and Futures Act

Under the Securities and Futures Act (SFA), any invitation to a person to lend money is considered an offer of debentures. This means P2P loans are treated as debentures, which is a form of security, and thus P2P lending is subject to securities regulations. A security is a financial instrument that holds monetary value and can be bought and sold.

One such security regulation is that P2P lending must be accompanied by a registered prospectus – a detailed report on security offered – unless exceptions apply. These exceptions are for the following offers:

Small offers: Loans of up to $5 million in a 12-month period through personal offers to targeted, pre-identified recipients
Private placements: Loans to no more than 50 individuals within 12 months, provided offers are not advertised and no selling or promotional expenses were incurred
Offers to institutional investors (e.g. the Government and banks)
Offers to accredited investors: Provided offers are not advertised and no selling or promotional expenses were incurred. Accredited investors are individuals whose net personal assets are above $2 million, net financial assets exceed $1 million, and have an income of not less than $300,000 in the last 12 months

Capital markets services licence

Another security regulation is that P2P lending platforms need a capital markets services (CMS) licence to operate. This is because P2P platforms deal in securities, which are considered capital markets products. Normally, platforms must have a base capital of $250,000 and a security deposit of $100,000 with MAS to obtain a CMS licence.

However, the MAS has allowed P2P platforms to maintain a base capital of only $50,000 and removed the need for a security deposit if the platform fulfils the following criteria:

The platform only acquires funding from accredited and institutional investors
The platform does not handle or hold customer money, assets, or positions
The platform does not act as principal of the loan

You may refer to our other article to find out more about CMS licence.

Financial Advisers licence

If the P2P lending platform provides financial advice, it would also need to have a Financial Advisers (FA) licence under the Financial Advisors Act. When applying for an FA licence, the MAS takes into account factors such as the fitness and propriety of the applicant, shareholders and directors, the track record, management expertise and financial soundness of the applicant, as well as the strength of internal compliance systems. This is to ensure that only trustworthy and reliable P2P lending platforms can give financial advice.

You may refer to our other article to find out more about an FA licence.

What Safeguards are in Place to Protect Investors Utilising P2P Lending Platforms?

Other than the regulatory frameworks mentioned above, the MAS has also issued guidelines on the measures P2P platforms should have in place to enhance transparency and help investors make better-informed investment decisions.

Disclose the scope of due diligence performed

The MAS expects licensed P2P platforms to disclose the scope of due diligence performed on borrowers to investors. This will allow investors to make decisions on whether they are satisfied with the due diligence conducted before investing. For example, information on the total outstanding loans of the borrower should be made available to investors.

Policies and procedures in place to handle borrower defaults

It is also expected that licensed P2P platforms have policies and procedures in place to handle borrower defaults. This includes how the platform will use a debt collection agency or commence legal proceedings against the borrower if the borrower defaults. The options available and their corresponding costs should be disclosed to the investors.

Business cessation plan

If a P2P platform ceases business, it can be difficult for investors to get back their money. The MAS therefore expects licensed P2P platforms to have a proper business cessation plan. The plan should have arrangements for handling investors’ money, communication between borrowers and investors on future loan repayments, and recovery actions in the case of borrower default.

Transparent interest rates

The MAS also expects all P2P platforms to disclose interest rates in a consistent manner to ensure investors can compare different loans effectively.

Anti-money laundering and terrorist financing controls

When it comes to P2P lending, it is also imperative that strict anti-money laundering measures and terrorist financing controls are in place. P2P platforms must take appropriate steps to identify money laundering and terrorism financing risks, and implement policies to mitigate such risks.

Platforms are expected to conduct their business in conformity with high ethical standards and cooperate with law enforcement authorities in Singapore to prevent money laundering and terrorism financing.

What are Some Practical Steps to Take When Utilising P2P Platforms?

For investors of P2P lending

When it comes to investing through a P2P loan, it pays to be selective and thoughtful. A good starting point is to make sure the platform itself has a CMSL. A CSML is essentially a stamp of regulatory approval, and it helps ensure that you are not handing your money over to an untrustworthy operator.

Beyond that, do not put all your eggs in one basket – you should diversify your investment across different borrowers or even different platforms. This will give you a better chance of cushioning the blow if one borrower defaults.

It is also imperative that you take the time to look closely at each borrower’s profile rather than just chasing the highest returns. If a borrower defaults, it is possible that you do not get back the principal amount invested, let alone the interest levied. Investors who seek guaranteed returns should opt for conventional instruments like savings or fixed deposits if they are not comfortable with the high-risk nature of P2P lending.

Finally, keep an eye on what other users are saying. Honest reviews and feedback from other users often reveal things that P2P platforms do not tell you.

For borrowers of P2P lending

For borrowers, the same principle applies: do not jump in before comparing your options. Different platforms can quote very different interest rates, so it is worth shopping around to see which platform offers the most competitive deal. Be wary of hidden charges too – borrowing from P2P platforms may not just involve having to pay interest but also administrative fees, which vary across platforms.

Though the speed and convenience of P2P lending can be tempting, it is important to step back and ask yourself if a traditional bank loan might actually make more sense. If borrowers have a healthy credit profile and are not in need of funds urgently, it may be better for them to opt for a traditional bank loan as their interest rates are lower. For example, banks could have an interest rate of around 7% whereas most P2P loans have interest rates of around 11-15% for a <6-12 month term.

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P2P lending is certainly an option in Singapore, though it is subject to certain regulations under the MAS. Platforms facilitating P2P lending must hold a capital markets services licence and possibly a Financial Advisers licence if they dispense investment advice.

In addition, safeguards such as due diligence, borrower default plans, business cessation plans, transparency of interest rates, and anti-money laundering and terrorist financing measures aim to make P2P lending a safer experience.

If you are considering borrowing or investing through a P2P platform, you may want to seek further guidance or advice from a corporate lawyer. For borrowers, the lawyer can help you understand borrower agreement terms and compare interest rates and loan process timelines. For investors, a lawyer can help you verify platform licenses and structure your investment to align with your risk appetite.