Are crowdfunding and P2P lending good investments?

  • Business
  • Saturday, 29 Apr 2017

INSTEAD of going for a good old, reliable personal loan, why not try something slightly more 21st century and opt for a crowdfunding campaign or a P2P (peer-to-peer) loan instead? 

Or maybe you should be the investor, the backer or the lender, to reap better returns than other investments?

Let’s first discuss crowdfunding, where you raise money from a large crowd of people to fund your project. Your project could be a product, but it could also be a personal passion, such as getting your book published or to set up a charity. 

Although most projects are initially backed by your friends and family, if you are able to sell your idea well, you could receive support from all over the world! 

Previous successful campaigns from Kickstarter included the Pebbles smartwatch, numerous card and board games, or gadgets like the “coolest cooler” with an integrated blender, speakers, waterproof USB chargers, cutlery, and a bottle opener.

All these are examples of “rewards-based” crowdfunding: as an investor, you won’t get your money back, but you will get the product that you are supporting. 

Basically, you are buying something that hasn’t been designed, developed and manufactured yet, and you are financing the whole operation. 

That means you do run some risk: the product might not raise enough funds to ever get built. This is consumption, not investment.

However, there is also “equity-based” crowdfunding, which is smaller, but more interesting from an investment point of view. 

You make an actual investment and in return, you get a small part of ownership in the company you are backing.

 You still don’t get your money back – unless you sell your equity stake – but you should expect dividend or a big payout when the company goes public or is sold. 

Of course, not every company becomes a success and this requires you to do serious due diligence before investing in the company.

Peer-to-peer lending, on the other hand, is not concerned with equity, but with debt.

 A large loan is raised by collecting smaller amounts from everyone who wants to lend to you. If you are a lender, you will receive your loan back, including interest.

 But of course, just like banks, you will face risks, such as the bankruptcy of the borrower. P2P lending has been around since the invention of money. In its oldest form, it’s your richer neighbour lending you money. 

Thanks to the internet, there are now platforms such as Lending Club, which greatly expands the number of people you can borrow from. 

Suddenly, the whole world becomes a money-lending community. As an investor, these platforms can offer attractive returns and help reduce the risk and damage of defaulting lenders.

In Malaysia, it will still take a few years before these alternatives really take off, either as a way to obtain debt or equity for entrepreneurs or as an investment vehicle for investors. 

But some fintech crowdfunding start-ups already exist, such as pitchIN, Mystartr and

Business-savvy entrepreneurs can already take advantage of crowdfunding through international sites, such as Kickstarter. 

For investors looking for returns, international P2P lending sites can offer attractive returns in US Dollar. 

For those of us looking to obtain unsecured loans for personal consumption, the bank still seems the best option. For now.

Mark Reijman is co-founder and managing director of, dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, personal loans and broadband plans in Malaysia.

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