Hong Kong is often chided by politicians and economists for lagging behind other regional economies in innovation and creativity.

There's, of course, some truth in it, and the government is sparing no effort in trying to help the city catch up with its rivals in the technology race. But, in a highly matured economy like Hong Kong's, procrastination is quite normal and it's not necessarily a bad thing.

A case in point is the development of peer-to-peer (P2P) lending platforms. The apparent lack of progress in Hong Kong has been blamed for denying aspiring entrepreneurs the much needed funding to launch their businesses and commercialize their supposedly brilliant ideas.

Such an argument, it seems, does make sense, at least in theory. Indeed, Hong Kong entrepreneurs would welcome any alternative source of funding because of the conservative lending policies of most local banks which recognize property as the only valid collateral for loans to borrowers without lengthy and credible track records. That policy practically rules out lending to most startups.

P2P may sound like a good idea. But, it has not taken off in Hong Kong because of potential lenders' worries about its security. Such concerns stem mainly from the fact that P2P platforms are a novelty that's not subject to adequate regulatory supervision. Their cautiousness appears to have been vindicated by reports of the collapse in 2015 of Ezubao - one of the largest P2P platforms on the Chinese mainland. Investigators found more than one million Ezubao investors, or lenders, having lost about $14.57 billion in a suspected scam.

A Hong Kong newspaper reported that tightening regulatory supervisions would threaten the survival of 90 percent of the mainland's estimated 4,856 P2P platforms, according to a multi-agency study led by the Beijing Municipal Bureau of Financial Work. "The wild growth of online lending in recent years has exposed a multitude of problems" that are posing "stern challenges" to regulators, the study says.

P2P is not exactly a new idea although the old model was based entirely on person-to-person contacts rather than online. Older Hong Kong people would remember the demise of the private lending clubs that were popular in the 50s and 60s. They eventually went out of style because of frequent defaults.

Politicians pushing for new ideas should bear in mind it's always better to have a regulatory framework in place before rushing into doing things that can cause unwary investors to lose money.

(HK Edition 02/24/2017 page1)