Some of these platforms have grown rapidly, providing consumers and small businesses with opportunities to access credit. Regulatory authorities, however, have to balance this with concerns regarding issues such as the protection of consumers, investors and lenders alike, liquidity, procyclicality, general business risk7 as well as the unintended consequences that these activities may potentially have for the traditional banking models.
And we need to distinguish the problematic from the unsustainable, if our advice is to be taken seriously. We need to test the limits to countercyclical policy in small open economies. The models we borrow from less open economies fail to take account of the early onset of the foreign exchange constraint in our economies.