P2P financing will continue to thrive next year

KUALA LUMPUR: Malaysia’s peer-to-peer (P2P) financing industry is expected to continue thriving in 2019, with an anticipated growth of 300% to RM300 million from RM100 million, said Funding Societies Malaysia CEO Wong Kah Meng.

Prospects for the acceleration growth of P2P financing are bright given the announcements made in Budget 2019 which suggested a more proactive role for P2P financing in alleviating the financing gap encountered by both the micro, small and medium enterprises (SMEs) as well as first-time home buyers.

Wong added that awareness of P2P financing has increased since the issuances of operating licenses to six platforms in November 2016.

Altogether, these platforms have been able to fulfill the needs of under-served SMEs by addressing their working capital and cash flow issues due to 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 said.

As for Funding Societies Malaysia, Wong said 2018 has been a strong year as it is on course to post a 600% growth rate.

“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,” he said.

“Henceforth, we are projecting a RM300 million growth in 2019 in view of strong demand from both the SME and investor communities,” he added.

Funding Societies Malaysia which commenced operations in February 2017 disbursed RM17 million that year. In 2018, the disbursement quantum jumped by almost 600% to RM121 million as of Dec 24.

The company has disbursed more than RM1 billion in SME financing across Southeast Asia.

Currently, Funding Societies Malaysia commands more than 50% market share of the total amount raised in Malaysia’s P2P financing industry.

Wong said rigorous credit assessing has enabled the company to keep default rate at less than 1%, which had in turn raised the confidence level of potential investors faith in its investment notes which offer returns up to 12% per annum.

Elaborating further on risk factors often associated with P2P financing, Wong said 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 Southeast Asia that took the bold move to regulate the P2P financing industry back in 2016,” he stressed.

“A minimum paid-up capital of RM5 million 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 added.

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 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.

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