Good prospects for peer-to-peer financing

THE peer-to-peer (P2P) financing industry in Malaysia is expected to continue thriving as Funding Societies Malaysia is expecting disbursement to grow to RM300mil in 2019 from about RM100mil this year, according to its chief executive officer Wong Kah Meng.

Against the backdrop of the Budget 2019 announcement, which suggested a more proactive role for P2P financing in alleviating the financing gap encountered by SMEs as well as first-time home buyers, prospects are bright for growth acceleration, he added.

“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.

“Henceforth, we are projecting a growth to RM300mil in 2019 in view of strong demand from both the SME and investor communities,” he said.

Wong pointed out that the awareness on P2P financing has increased since the issuances of operating licenses to six platforms in November 2016. These platforms have helped fulfil the needs of under-served SMEs by addressing their working capital and cashflow issues due to their 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,” he added.

This year has proven to be a strong one for Funding Societies Malaysia as it is on course to post a 600% growth rate.

Funding Societies Malaysia, which commenced operations in February 2017, disbursed RM17mil that year. In 2018, the disbursement quantum jumped exponentially to RM121mil as of December 24.

The company has disbursed more than RM1bil in SME financing across South-East Asia.

Funding Societies Malaysia noted that it currently 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%. This has raised the confidence level of potential investors to have faith in our investment notes that offer returns of up to 12% per annum,” said Wong.

Elaborating further on the risk factors often associated with P2P financing, Wong said 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 South-East Asia that took the bold move to regulate the P2P financing industry back in 2016. A minimum paid-up capital of RM5mil 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%,” he said.

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.

SME , Funding Societies Malaysia , p2p