Funding Societies, a Malaysian-founded peer-to-peer (P2P) financing platform, ends 2017 as the domestic market leader of the country’s rapidly growing P2P financing sector. Data compiled by all P2P financing operators in Malaysia from February 2017, when the first local P2P platform began operations, to November 2017, shows that domestic P2P platforms have raised a total of RM17 million for Malaysian SMEs. Of the RM 17 million, Funding Societies alone contributed to around RM10 million in financing or more than half of the total amount, while maintaining a default rate of 0%. As the Asian Institute of Finance expects crowdfunding to pick up pace in the near future as a critical source of alternative financing for micro, small, and medium enterprises (SMEs) in Malaysia, Funding Societies plans to accelerate total SME financing in 2018 to support even more Malaysian SMEs to grow their businesses whilst maintaining its strong risk management practices to ensure investor protection.
P2P financing is a FinTech (financial technology) solution with enormous potential to address the lack of working capital for SMEs and also greater wealth creation opportunities for investors. Platforms connect SMEs with investors, both retail and institutional, through an online marketplace, thereby increasing access to financing for SMEs and alternative investment opportunities for investors.
Funding Societies allows investors to invest from as low as RM100, making it easy and affordable to diversify to minimize the risk of their portfolio. Investors can earn returns up to 14% per year, higher than fixed deposits, bonds, and other traditional instruments.
Since beginning its operations in February 2017 as Malaysia’s first P2P financing platform, Funding Societies has successfully provided financing between RM75,000 and RM1 million to SMEs through business term financing or invoice financing. These funds were used for business expansion purposes or to bridge short term credit gaps. These SMEs come from a variety of industries including wholesalers and retailers in the trading industry, manufacturers, and professional service providers. Funding Societies’ application process is fast, simple, online-based, and requires no collateral, while total interest costs are minimized due to shorter financing tenors, typically less than 12 months tenor for SMEs.
SME development is a top priority for the Malaysian government. According to estimates cited by Securities Commission (SC) Malaysia, there is a RM80 billion SME financing gap in Malaysia. Yet domestic SMEs make up 97% of businesses in Malaysia and contribute to 65% of national employment. To tap into P2P financing to address the SME funding gap, Malaysia became the first country in ASEAN to regulate P2P financing when Securities Commission (SC) introduced six P2P operators in November 2016. In fact, second Finance Minister of Malaysia, Y.B. Datuk Seri Johari bin Abdul Ghani, stated that he expects to see more SMEs apply for P2P financing.
Wong Kah Meng, CEO of Funding Societies Malaysia, said, “Since we launched in February this year, we have seen strong interest from investors and SMEs, with close to 8,000 registered investors and SMEs who have approached us for our financing and investment solutions. We are excited that P2P financing has taken off to a strong start and thankful for the opportunity to serve a wide variety of local SMEs. Our strategic partnerships with leading institutions from different industries including RHB Banking Group, Cheng & Co, and Senturia Capital have enabled us to maximize our reach to SMEs. On the other hand, we have also experienced strong interest from Malaysian investors. We completed our fastest crowdfunding opportunity within just 15 minutes.”
Wong Kah Meng adds, “We exceeded our annual target of RM10 million in financing ahead of schedule in November 2017 whilst maintaining a 0% default rate. The challenge has always been to balance between providing greater access to financing to SMEs whilst protecting investors through thorough due diligence and risk assessment processes. We still have a long way to go as we continue to focus on building greater awareness and education of P2P financing in Malaysia.”
Funding Societies is currently the largest P2P financing platform in Malaysia and Southeast Asia. The platform also has operations in Singapore and in Indonesia (under the name of Modalku). Regionally, Funding Societies has disbursed more than RM285 million in working capital financing to SMEs across more than 1,550 deals. Funding Societies is recognized and regulated by Securities Commission (SC) Malaysia and has received various awards and recognition both regionally and globally, including making the prestigious Fintech 250 list, a select list of emerging companies working on groundbreaking financial technology around the world and winning the Global SME Excellence Award from the United Nations’ ITU Telecom Unit, which recognizes the most promising and innovative information and communication technology developed by SMEs for social impact.