CapBay aims to provide financing to more SMEs

CapBay founder Ang Xing Xian.

MULTI-FINANCIER platform CapBay plays multiple roles and it is more than just a peer-to-peer (P2P) platform that provides financing.

“CapBay currently operates in Malaysia, China, Singapore and Thailand.

“For instance, when a company expands to another country, it is considered foreign to the banks there, which makes it harder to get financing.

“CapBay is able to provide the financing because we are already operating there,” founder and chief executive officer Ang Xing Xian tells StarBizWeek.

According to Ang, CapBay has collaborated with more than 10 companies to help them venture overseas, and it is currently in talks with more foreign banks.

“Even in execution, we have the expertise in supply chain finance where we have our own enterprise fintech solution which we built in-house to manage elements like supply chain financing transactions,” he says.The solutions are not just used by CapBay but also by multiple banks.

Ang says the innovation is the brainchild of local tech talent based in Kuala Lumpur as the team has grown from strength to strength.

Identifying the current gaps in the financing world for small and medium enterprises (SMEs), Ang and other founders Darrel Ang, Dion Tan, and Edwin Tan set about forming their financial technology (fintech) platform in 2017 that would go on to become one of the leading multi-bank supply chain finance and P2P platforms today.

Besides assisting in terms of finance for SMEs, CapBay also helps take companies looking to expand their businesses abroad, according to Ang.

“We don’t only help companies go abroad but we export the technology too and banks are very open to it,” he says.

CapBay’s largest part of the business is its supply chain financing, whereby it matches SMEs needing funds to investors looking to invest in businesses.

“Usually SMEs may opt to take overdraft or term loans, but supply chain financing is becoming better known especially for new companies who may sell to a business but need to wait for payment.

“This is where CapBay can provide the funds first,” he says.

Ang got his first taste of supply chain financing when he recalled how his father, a fisherman, was unable to sell directly to a supermarket.

“My dad would sell the fish caught to a middle man, who would then mark up the price and sell it to a supermarket.

“But the supermarket would take time to pay, sometimes up to six months.

“If my dad had sold to it directly, he would definitely need cash while waiting for payment, which is why he went through a middle man.

“Effectively, I realised the middle man was actively doing supply chain financing,” he says.

Ang says if one were to compare it with a regular investment like bonds or shares, the state of returns with CapBay is relatively good at 8.3%.

“Our investors are diversified, and have enjoyed our track record.

“Not only are our return rates higher, we also have had the lowest default rates in the market at 0.2%.

“The equity market has been volatile for the last couple of years. It’s been the same for the bond market where many thought it was safe until Covid-19 hit and there were defaults as well as inflation when base rates went up,” he says.

On top of that, Ang says the group exercises prudence when it comes to risk culture perspective, particularly in who to provide financing to.

One of the main differentiators that give CapBay a step up is the way it serves the unbankable.

Ang says traditional banks have a way of rating an SME but CapBay has a different credit scoring and methodology.

“A traditional bank or typical bureau would say a certain SME is unfundable and its default rate may even be as high as 50%. But based on our system, the default rates have been as low as 0.3%,” he says.

Ang explains that a bank may look at cash flow or assets, among things, to determine if loans are applicable but these ways are no longer relevant.

“The methods can be outdated. These days, younger companies are very dynamic. They may also not have access to proper accounting, and by nature, they’re small, so they don’t have a track record.

“This makes them naturally ‘bad’ customers, or underserved when it comes to financing,” he says.

In contrast, CapBay looks at other relevant information like bank statements, and whether there are improved business activities or leakages between companies and directors.

“We have artificial intelligence that runs through all the transactions to give us more insights and because of that, we come up with quite different decisions compared with the banks,” he says.

CapBay has provided more than RM3bil in financing to some 1,700 SMEs, and it has plans to further grow its targets.

“This year, we aim to provide more than RM1bil in financing and we want to double that and hit about 3,000 SMEs.

“Our growth has been organic from the start, for which we are very glad,” he says.

Moving forward, Ang says 2024 will be a big year for CapBay.

Not only will the group be branching out to Vietnam, Indonesia and the Philippines, it will also be setting up offices there all within this year.

“We are looking at making Malaysia the hub for South-East Asia so when local companies expand their businesses, CapBay is there to support them,” he says.

While Malaysia has been the stepping stone, the team will need to expand to other regions.

CapBay will also continue to drive digitalisation and assist trade and business transactions by launching a suite of solutions for businesses to digitalise.

“Many SMEs cannot grow because they are not digitally enabled, we’ve seen this a lot in business to customer type business where there is still plenty of opportunities to go digital whether through e-wallet or others.

“We are looking at launching this at the end of the third quarter or early fourth quarter this year,” Ang says.

He adds Malaysia will always be the first country in which CapBay launches any business venture, as there is still plenty of potential and talent to be grown here.