Malaysia’s peer-to-peer (P2P) financing industry is expected to continue thriving with an anticipated 300% growth to RM300 million in 2019 (2018: RM100 million), according to Funding Societies Malaysia CEO Mr Wong Kah Meng. Against the backdrop of the Budget 2019 announcement which suggested a more proactive role of P2P financing in alleviating the financing gap encountered by both the micro, small and medium enterprises (SMEs) as well as first-time home buyers, prospects are bright for growth acceleration, he adds.
“The awareness of P2P financing has increased since the issuances of operating licenses to six platforms in November 2016,” Mr Wong Kah Meng points out. Altogether, these platforms have been able to fulfill the needs of under-served SMEs by addressing their working capital and cash flow issues due to lack of collateral or three-year track record requirement that is typically requested by financial institutions. “Moving forward, we foresee a greater participation in the P2P financing realm by institutional investors such as investment banks and asset management companies,” envisages Mr Wong Kah Meng.
From its own perspective, 2018 has proven to be a strong year for Funding Societies Malaysia as it is on course to post a 600% growth rate.
“We expect the P2P financing industry to grow strongly in 2019 driven by increasing awareness on the scheme and the supportive budget initiatives from the government,” enthuses Mr Wong Kah Meng.
“Henceforth, we are projecting a RM300 million growth in 2019 in view of strong demand from both the SME and investor communities.”
Funding Societies Malaysia which commenced operations in Feb 2017 disbursed RM17 million that year. In 2018, the disbursement quantum jumped exponentially by almost 600% to RM121 million as of December 24. The company has disbursed more than RM 1 billion in SME financing across Southeast Asia.
Currently, Funding Societies Malaysia commands more than 50% market share of the total amount raised in Malaysia’s P2P financing industry. “On the investors’ side, our rigorous credit assessing process has enabled us to keep our default rate at less than 1%,” reveals Mr Wong Kah Meng. “This has raised the confidence level of potential investors to have faith in our investment notes that offer returns up to 12% per annum.”
Elaborating further on risk factors often associated with P2P financing, Mr Wong Kah Meng explains that the Securities Commission (SC) has set in place strict regulations to ensure that the industry is well-regulated.
“In fact, the SC is the first regulator in Southeast Asia that took the bold move to regulate the P2P financing industry back in 2016,” he stresses. “A minimum paid-up capital of RM5 million as well as an experienced and competent management team are some of the major criteria examined by the SC before an approval is granted. Moreover, the SC has capped the maximum chargeable interest rate at 18%.”
There has been escalating concerns in recent times on the viability of the P2P financing industry following the collapse of numerous P2P financing platforms in China due to fraudulent transactions on the part of the operators. As a result, the number of operating Chinese P2P platforms have fallen to 1,836 as of June 2018 from its zenith of 3,800 in 2015. The number is expected to shrink further to 200 over the next three years as most existing platforms do not meet regulatory requirements.
About Funding Societies Malaysia
Launched in early 2017 in Malaysia, Funding Societies is the first and largest P2P financing platform in Malaysia. Funding Societies connects SMEs with investors through an online marketplace, thereby increasing access to financing for SMEs. By investing into SMEs, investors could earn risk-adjusted returns greater than fixed deposits, bonds, and other traditional investment instruments. Meanwhile, SMEs obtain access to short-term financing to expand their business through a fast and simple online process. Additionally, SMEs benefit from not having to provide collateral for financing, while interest costs are minimized due to short financing tenures.
Funding Societies also has presence in Singapore and Indonesia (where it is known as Modalku), thus emerging as of the largest digital financing platforms in the Southeast Asian region. Both Funding Societies and Modalku have reached a total of more than RM1 billion in disbursed working capital to nearly 80,000 SMEs in Southeast Asia since its establishment.
Funding Societies/Modalku have won multiple awards in recent times, including being named the 2018 CB Insights Fintech 250 List of Fastest-Growing Fintech Startups as well as being the only P2P Lender in Southeast Asia in the Top Fintech 100 list for 2018 by H2 Ventures and KPMG.