Brazil's Central Bank authorizes peer-to-peer lending

BRASILIA/SAO PAULO, April 26 (Reuters) - Brazil’s Central Bank on Thursday released rules for credit start-ups that include authorization for peer-to-peer lending, as a way to increase competition in loans in a country with notoriously high interest rates for consumers.

Credit fintechs will be allowed to operate with a minimum capital of 1 million reais ($288,000), according to the new regulation. Peer-to peer lending had not yet been formally authorized in the country. The practice involves lending between individuals through online services.

Fintechs welcomed the regulation, saying it would increase competition with Brazil’s large banks. Fintechs’ annual loan disbursement is still low in the country, about 2 billion reais a year, according to the industry group ABCD, which represents credit fintechs.

Bruno Poljkan, head of ABCD and director of credit fintech Just, said volumes were expected to rise and the new regulation may allow larger financing rounds with investors.

“Once we have clear rules, investors feel safer,” Poljkan said. Just has received investment from Swedish fund Vostok Emerging Finance. Sandro Reiss, founder of credit fintech Geru, said regulation would allow Brazilian fintechs to grow. ($1 = 3.4755 reais) (Reporting by Marcela Ayres and Aluisio Alves; Writing by Tatiana Bautzer; Editing by Peter Cooney)