Malaysia’s P2P total financing to reach RM1b in 2020

by SHAHEERA AZNAM SHAH/ pic by TMR FILE

DOMESTIC peer-to-peer (P2P) financing industry is expected to exceed RM1 billion in 2020, said the Funding Societies Malaysia.

Co-founder and CEO Wong Kah Meng (picture) said with the total financing for the industry standing at RM521 million last year, 2020 poised to record more growth.

“As the Malaysian government seeks to boost micro, small and medium enterprises’ (MSMEs) GDP contribution from 38% to 50% by 2030, MSMEs are supported through various incentives announced during Budget 2020, with more than RM1 billion in budget allocation to drive small and medium enterprises’ (SMEs) growth and activities.

“In addition to the RM100 million of government financing through the My Co-Investment Fund 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 grow,” Wong said in a statement.

He said Funding Societies Malaysia is projected to disburse about RM500 million of financing for SME entrepreneurs in 2020 due to the heightened interest in the businesses.

“Based on our recent growth and outlook for 2020, Funding Societies Malaysia alone is expected to disburse RM500 million of financing this year, supported by robust demand from the MSMEs and investors.

“With greater awareness and ongoing 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 said.

Last year, Funding Societies Malaysia disbursed RM400 million of financing to SME entrepreneurs, about 250% increase from RM114 million disbursed in 2018.

“The strong growth benefitted over 1,000 MSMEs in Malaysia, and last year 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 MSMEs, by leveraging on our partners’ MSME network and alternative data, with consent, and offering them tailored financing solutions,” Wong said.

He added that P2P financing is one of the main elements in the financial technology industry to enable the inclusive growth for digitally-inclined businesses.

On the investor front, Wong said Funding Societies Malaysia has more than 40,000 investors, while managing to maintain a 2% in default rate.

“While 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 while investing.

“Also, we have successfully recovered or restructured more than RM10 million, benefitting investors, after thorough negotiations and disciplined follow-ups with SMEs,” he said.

Recently, the Securities Commission Malaysia has standardised the definition of default rate for P2P financing to ensure better consistency and transparency across platforms to enable investors to make better-informed decisions.

At present, Funding Societies Malaysia takes up more than 60% of the market share in Malaysia’s P2P financing industry, having disbursed more than RM3 billion of financing to date.