P2P financing to hit RM1bil

Alternative funding: Wong says P2P financing is a key to enabling inclusive growth for digitally-inclined SMEs.

THE local peer-to-peer (P2P) financing industry is expected to almost double with total financing set to hit RM1bil this year from RM521mil in 2019, according to Funding Societies Malaysia.

In 2019, Funding Societies disbursed RM400mil in financing to SMEs, an almost 250% increase from the previous year of RM114mil. This strong growth has benefited over 1,000 micro, small and medium enterprises, it adds.

According to co-founder and chief executive officer Wong Kah Meng, Funding Societies has more than 60% market share of the P2P financing industry in Malaysia and is the largest platform across South-East Asia, having disbursed more than RM3 billion in financing.

“2019 was a strong year for us as we grew steadily and safely to support SMEs and investors. We also successfully launched a number of notable partnerships with Lazada, Fave, MyTukar, MUV, CarList, Carsome and Slurp. These collaborations have enabled us to reach out to more creditworthy but unbankable SMEs, by leveraging on our partners’ network and alternative data, with consent, and offering them tailored financing solutions.

“As one of the key pillars of the fintech industry, P2P financing is a key ingredient for enabling inclusive growth for digitally-inclined SMEs, ” says Wong.

On the investor front, Funding Societies Malaysia has onboarded more than 40,000 investors to-date.

Notably, along with the increase in funds disbursement, 2019 also saw an increase in the number of defaults.

Funding Societies has a 2% default rate.

“Whilst the risk of default is natural for all businesses, we have successfully maintained a 2% default rate through our robust risk management, due diligence and collections processes. We have also been proactively and regularly updating our investors to ensure them a peace of mind whilst investing.

“To that end, we have successfully recovered or restructured more than RM10mil, benefitting investors, after thorough negotiations and disciplined follow-ups with SMEs, ” Wong adds.

The Securities Commission recently standardised the default rate definition for P2P financing to ensure better consistency and transparency across platforms to enable investors to make better-informed decisions.

Wong notes that the SME sector has received strong support through various incentives announced during Budget 2020 as the government seeks to boost SME contribution to GDP from 38% to 50% by 2030. More than RM1bil have been allocated to drive SME growth and activities.

“In addition to the RM100mil in government financing through the My Co-Investment Fund (MyCIF) Scheme to support

start-ups and SMEs, we expect greater interest in P2P financing in 2020 from institutional investors as the awareness and maturity of the P2P financing industry grows.

“Based on our recent growth and outlook for 2020, we expect to disburse RM500mil in financing this year, supported by robust demand from SMEs and investors. With greater awareness and on-going education and engagement efforts, we anticipate P2P financing to play a more proactive role in helping to address the SME financing gap in Malaysia, ” he says.

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