The U.S Government’s COVID-19 Relief Plan May Sideline The Fintech As a Lender
April 10, 2020 7:06 pm
The U.S Small Business Administration (SBA) launched a Paycheck Protection Program (PPP) as part of the federal government’s $2 trillion coronavirus relief package, on April 3.
This Paycheck Protection Program (PPP) trying to help small businesses by providing them low-interest and forgivable loans, during the pandemic. The $349 billion loan program is particularly targeted at Main Street firms that require necessary liquidity to satisfy their employees and other expenses are actively attempting to engage private-sector lenders such as banks and credit unions to preserve the PPP loans.
Although nonbank Fintech firms desire to be partners in the Paycheck Protection Program (PPP) to give relief to small businesses. On April 6, a report by Law360 showed that fintechs may not be authorized by the U.S. Treasury and SBA to preserve the loans even though they have the technology and networks to originate a high volume of loans efficiently but the eligibility requirements and other features of the program could leave these lenders sitting on the sidelines.
One of the issues is that the federal officials judged that to meet the terms of the ‘Bank Secrecy Act’, which is a precondition for approval as a PPP lender that fintech is not strong enough in compliance measures to prevent anti-money laundering (AML). A financial services partner at Manatt Phelps & Phillips, Scott Pearson informed journalists that the government has not taken a clear decision yet for fintechs to acquire certification as a lender, under the PPP program:
“Essentially, this [AML] rule means you won’t see any marketplace lenders or other fintech companies making these loans. They may act as brokers, going to their customer bases and working with banks to help the banks make loans, but I don’t think that they’re going to be making the loans themselves.”
Another barrier is the low-interest rate of 1% on PPP loans, which may not be favourable for small-scale fintechs.
Crypto Markets’ Aid During COVID-19
To support communities and sectors sceptically attacked by the COVID-19 pandemic, lending money is not the only thing that fintech and crypto-related firms are trying.
There is a series of charitable donations programs have been originated by major industry players. Developers have also pointed to blockchain technology as a key tool for protecting digital privacy through an era of likely “surveillance creep” to control the pandemic, the government is tracking the health and movements of citizens’.