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Japan's top peer-to-peer lending platform faces penalties

Regulators says Maneo Market overlooked client's misuse of investor money

The Financial Services Agency will decide whether to punish Maneo Market, the biggest social lending platform in Japan.   © Reuters

TOKYO -- Japan's biggest platform for online social lending, or peer-to-peer lending, faces punishment over lax oversight.

Tokyo-based Maneo Market overlooked misuse of funds that a client collected from investors, according to regulators.

The Securities and Exchange Surveillance Commission recommended on Friday that the Financial Services Agency impose administrative penalties on Maneo Market.

On behalf of a client named Green Infra Lending, Maneo Market raised roughly 13 billion yen ($117 million) from 3,084 investors to finance projects inside and outside Japan, promising annual returns of 11% to 14%.  

The loans were supposed to be directed toward such undertaking as a solar power project in the northern prefecture of Hokkaido and a hydropower project in Sri Lanka. But in reality, at least 1 billion yen of the money appears to have been used for purposes other than what was specified, such as to increase the capital of a group company of Green Infra.

Green Infra did not separately manage its own funds and those raised from investors. Still, as the intermediary between the borrower and investors, Maneo Market is responsible for monitoring the use and management of the funds raised.

Social lending offers high yields for investors and the convenience of easy fundraising for borrowers. The market for such lending more than doubled from around 65 billion yen in 2016 to 133 billion yen in 2017 and will reach 900 billion yen in 2022, the Fuji Chimera Research Institute estimates.

But the legal system has not caught up with this booming sector of financial services. Three companies other than Maneo Market have been ordered to improve or suspend their operations.

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