Entities From First Cohort of SECP’s Regulatory Sandbox Complete Testing

Innovative business solutions selected for live testing and experimentation in the first cohort of Securities and Exchange Commission of Pakistan’s (SECP) Regulatory Sandbox have successfully passed evaluation on the basis of mutually agreed test scenarios and expected outcomes.

In its first cohort of Regulatory Sandbox, SECP permitted six solutions for testing in a controlled environment subject to terms and conditions. The tests were focused on achieving clarity on whether such products/solutions could operate in the existing regulatory framework or amendment or an altogether new amended regulatory framework would be required.

The selected participants tested solutions for Digital Peer-to-Peer (P2P) Lending Platform, Mutual Fund Digital Distribution and Robo Advisory, Digital Equity Crowdfunding Platform, Digital Insurance Brokerage and Digital General Takaful Provider. During the six months testing phase, the participants were in constant liaison with SECP and shared impediments, whether regulatory or otherwise, to their testing.

The participant testing Digital P2P Lending Platform received an encouraging response both from lenders and borrowers. SECP is in the process of amending the NBFC regulations to provide a comprehensive enabling framework for P2P lending. Under the proposed framework, an existing licensed NBFC would be able to operate a P2P Lending Platform subject to the regulatory requirements and obtaining prior permission from the SECP.

Similarly, the tests also paved the way for a framework of Mutual Fund Digital Distribution and Robo Advisory. SECP issued guidelines encouraging the use of FinTech for distribution and advisory purposes. Takeaways from testing also enabled SECP to develop rules for micro and digital-only insurer. Post public consultation of these rules is currently in the final stages of approval.

The inclusion of a product/solution in the sandbox, however, does not guarantee legitimacy for real-life commercial operations without express written approvals from SECP.

The shortlisted participants of Cohort II of the Regulatory Box have now also entered the testing phase. The testing period varies from six to nine months, depending on the solution being tested and the timeline allowed to the participants. SECP will also invite applications for participation in Cohort III in the coming weeks.