P2P lending in Malaysia

A Complete Review of P2P Lending Platforms in Malaysia

Posted by

A Complete Review of P2P Lending Platforms in Malaysia

Preface

The popularity of P2P lending in Malaysia has surged in an exponential pace since its introduction in 2016. In 2016, Malaysia became the first country in ASEAN to regulate P2P lending. To date, SC had issued licenses to six P2P lending platform operators in Malaysia. Many millennials have started dabbling in P2P lending as investors. It’s not surprise that such investment option has received overwhelming response since its debut. Many investors begin to diversify their investment portfolios to include P2P lending as an alternative investment due to its lucrative returns and low entry requirement. A general question that investors would have in mind before getting their toe wet in P2P lending. “Which is the best P2P lending platform in Malaysia?”. Here is the complete review of P2P lending platforms in Malaysia I gonna share with you after having a thorough comparison of each platform.

What is Peer-to-Peer Lending (P2P Lending)?

First of all, let’s have a quick recap on what is P2P lending. As explained in my previous post, Peer-to-Peer Lending – Quick Guide, Peer-to-peer lending, is also known as P2P lending. P2P lending is essentially loan of money to individuals or businesses through an online marketplace that matches between the lenders and borrowers.

Traditional banking process of borrowers requesting loans and investors depositing money
Traditional banking process
Peer-to-peer lending process on borrowers requesting loans and investors investing in loans
Peer-to-peer lending process

Click here for better understanding on P2P lending.

P2P Lending Platforms in Malaysia

There are six licensed P2P lending platform operators in Malaysia. Based on SC guidelines, a P2P lending operator must be incorporated under Companies Act 1965 with a minimum paid-up capital of RM5 million. Amongst other things, a P2P operator needs to put in place a diligent risk scoring system and ensure compliance of the SC approved platform rules. Besides, the operator must place the amounts deposited by both investors and issuers in a 3rd party trustee account before making any disbursement.

No. P2P Lending Platform(s) Operated by
1 Funding Societies Malaysia Modalku Ventures Sdn Bhd
2 Fundaztic Peoplelender Sdn Bhd
3 QuicKash QuicKash Malaysia Sdn Bhd
4 AlixCo FBM Crowdtech Sdn Bhd
5 Nusa Kapital Ethis Kapital Sdn Bhd
6 B2B FinPal B2B Finpal Sdn Bhd

Overview of P2P Lending Platforms in Malaysia

1. Funding Societies Malaysia – Modalku Ventures Sdn Bhd

Funding Societies - P2P lending platform in MalaysiaFunding Societies is a Southeast Asia P2P lending platform headquartered in Singapore. Kelvin Teo and Reynold Wijaya founded Funding Societies in 2015 while they were studying at Harvard Business School. Funding Societies serves primarily the SME markets in Singapore, Indonesia and Malaysia. It made its debut in Malaysia in February 2017. Funding Societies is the first and largest P2P lending platform in Malaysia at the time of writing. At the time of writing, Funding Societies had successfully disbursed approximately RM700 million worth of loans across the region. Besides, it also maintains a low default rate of below 1.5% regionally since its launch. Funding Societies had raised two rounds of funding, Series A in 2016 and Series B in 2018 amounting to S$10 million and US$25 million respectively. The latter was led by Softbank Ventures Korea.

2. Fundaztic – Peoplelender Sdn Bhd

Fundaztic - P2P lending platform in Malaysia

A group of prominent ex-bankers and a lawyer founded Fundaztic. It commenced its operations in July 2017. Jeffrey Chew is the founder and Chairman of the company. Besides, he is also currently the Group CEO of Paramount Corporation Bhd, a company listed on the Main Market of Bursa Malaysia. Kristine Ng is the incumbent CEO of fundaztic, with years of experience in Credit Guarantee Corporation before taking up her role in Fundaztic. As of June 2018, Fundaztic had successfully disbursed closed to RM15 million loans to SMEs.

3. Quickash – QuicKash Malaysia Sdn Bhd

QuicKash - P2P lending platform in Malaysia

QuicKash is operated by QuicKash Malaysia Sdn Bhd, a wholly-owned subsidiary of ManagePay Systems Berhad (ManagePay). ManagePay is listed on the ACE Market of Bursa Malaysia, a provider of end-to-end electronic payment solutions for banks and financial institutions, merchants and card issuers in Malaysia. QuiKash offers most of the investment notes that come with a principal guaranteed element. QuicKash charges the borrowers a guarantee fee for 3rd party guarantee services. Correspondingly, it minimizes the risk of default by the borrowers thereby provides the investors an additional layer of protection. QuicKash had successfully disbursed loans amounting to RM9.2 million as of August 2018 since launch in September 2017.

4. Alixco – FBM Crowdtech Sdn Bhd

Alixco - P2P lending platform in Malaysia

Alixco is operated by FundedByMe Malaysia (FBM Crowtech Sdn Bhd). FundedByMe also operates equity crowdfunding platform as approved by SC Malaysia. FundedByMe is a Swedish-based company. It runs a crowdfunding platform in Europe with more than 86,000 investors across 196 countries. It had successfully raised more than EUR 37 million for 472 companies according to its official website.

5. Nusa Kapital – Ethis Kapital Sdn Bhd

Nusa Kapital - P2P lending platform in Malaysia

Nusa Kapital is operated by Ethis Kapital Sdn Bhd. It is the world’s first regulated Shariah-compliant P2P lending platform. It was founded by Umar Munshi, the CEO of the company. He is also the chairman of the Islamic Fintech Alliance. Besides, the team comprises experienced elites such as former senior World Bank and Barclays Bank executives.

6. B2B FinPal – B2B Finpal Sdn Bhd

B2B FinPal - P2P lending platform in Malaysia

B2B FinPal is operated by B2B Finpal Sdn Bhd. It is a subsidiary of B2B Commerce, founded by Dr Lee Thean Seong. He held senior management position for Hewlett Packard in Malaysia and Singapore. As of March 2018, the platform had successfully raised about RM15 million by issuing invoice financing notes. B2B Finpal offers the largest number of invoice financing notes to-date.

Comparison of P2P Lending Platforms in Malaysia

Description Funding Societies Fundaztic QuicKash Alixco Nusa Kapital B2B FinPal
Initial deposit for registration RM1,000 RM0 RM0 RM0 RM0 RM1,000
Minimum investment RM100 RM50 RM100 RM500 RM500 RM100
Maximum investment for individuals RM50,000 Recommended RM50,000 No limit Recommended RM50,000 RM50,000 RM50,000
Financing type Business loan or Invoice financing Business loan Business loan Business loan Business loan Business loan or Invoice financing
Financing tenure 1 - 24 months 3 - 60 months 1 - 24 months 6 - 24 months 2 - 6 months 1 - 6 months
Service fee 0.16% - 2% of each repayment or 15% on interest 1% of each repayment 1.25% - 1.5% of each repayment 1% of each repayment 10% on return 30% sharing on interest
Repayment type Bullet or Instalment Instalment Instalment Instalment Instalment Bullet or Instalment
Investment opportunities High High Medium Low Low Medium
Auto invest option Yes Yes No No No Yes
Mobile application Yes Yes Yes No No Yes

Which is the Best P2P Lending Platform – My Personal Opinion

If you are interested in investing in P2P lending, you may wonder which is the best P2P lending platform for investors in Malaysia. After conducting a thorough research and comparison of each P2P lending platform, I am currently using Funding Societies and QuicKash.

Why I choose Funding Societies?

Funding Societies is the first and largest P2P lending platform that holds the largest domestic market share in Malaysia. It had successfully disbursed more than RM700 million in aggregate regionally with a low default rate of below 1.5%. Given that its operations in Malaysia is still fairly new, it may be too early to establish a default rate based on historical trend to reflect the credit profile of the local market. Nonetheless, the credit assessment process across the region should be broadly similar.

Low Default Rate & Good Credit Control

The due diligence process and credit control in place are proven to work effectively. This is evident by its track record of successfully maintaining such a low default rate since its inception. Additionally, Funding Societies secures personal guarantees from the Directors of the issuers in lieu of collateral and insurance on the investment notes. It also obtains issuers’ latest bank statements and financial records as part of its credit assessment process. There is no risk rating assigned to each investment note unlike other platforms. Funding Societies provides qualitative aspect of the investment notes based on its analysis on the issuers. Therefore, it’s easier for the investors to understand the nature and underlying risk of the investment notes. Consequently, investors need not to try hard understanding the risk ratings that are made up of alphanumeric characters that may not be sensible to everyone.

User-friendly & High Investment Opportunities

The platform is user-friendly with excellent user interface design in the mobile app. Not to mention the sign up process is quick and fairly easy to use as well for beginners. More importantly, Funding Societies offers high investment opportunities in terms of the frequency of investment notes issued on its platform. This is definitely a BIG BIG deal for me. A simple interest rate of 12% per annum with monthly repayment (principal + interest) is equivalent to effective interest rate of 21.5% per annum. The effective interest rate is calculated on the assumption that you will re-invest each monthly repayment with the same interest rate of 12% p.a. It will just be a number on paper that will never materialise if you don’t even have the opportunity to re-invest! Funding Societies offers sizeable investment notes with high frequency that gives the investors the opportunities to compound their returns throughout the year.

Invest with Ease & Great Convenience

Besides that, it also allows investors to setup an auto-investment tool. The tool helps the investors to invest based on their requirements in terms of financing type, interest and tenure. You can just imagine how convenient it is to invest in P2P lending using Funding Societies!

For those who are interested, you can click on this link to sign up: Sign up to invest in Funding Societies. (Disclosure: This is an affiliate link)

Why I choose QuicKash?

You may be puzzled as to why I will choose QuicKash to invest in P2P lending. As depicted in the table above, the service fee for QuicKash doesn’t look competitive and appears to be at the higher end as compared to other platforms. In addition, it also doesn’t offer high investment opportunities and the interest rates on the investment notes are generally lower. Yes, I know. It contradicted with the main reason on why I choose Funding Societies. Obviously I don’t have a stake in QuicKash that compel me to hard sell it to you. The main and the ONLY reason why I choose QuicKash is all about DIVERSIFICATION!

The inherent risk of investing in P2P lending is the risk of default by the issuers when they fail to make their repayments on time. The best way to minimize your risk is to diversify your loans portfolio. Refer Best Way to Avoid Risk of Investing in P2P Lending Malaysia. The beauty of QuicKash is that it charges the issuers a guarantee fee upfront for guarantee services provided by third party guarantee corporation by way of deducting from the financing amount. QuicKash claims all investment notes with good credit rating come with a principal guaranteed element. It discloses that the investors will never lose their principal investment amount even if issuer fails to repay.

QuicKash investment note details
QuicKash investment note that I have invested with a principal guaranteed element

Besides, QuicKash doesn’t impose a limit on the investment amount for retail investors. For obvious reasons, I choose QuicKash to diversify my loans portfolio to minimize my risk of investment.

For those who are interested, you can click on this link to sign up: Sign up to invest in QuicKash.

The Bottom Line

The lucrative returns from investing in P2P lending may sound too good to be true. Just a word of caution, investing in P2P lending is certainly not risk-free. The apparent risk is obviously the risk of default and investors may potentially lose their principal amounts. Therefore, the only way to maximize your returns with lower risk exposure is to diversify your investment. You can refer here for better understanding on the risks of P2P lending before you invest.

“In investing, what is comfortable is rarely profitable.” – Robert Arnott

You may be surprise that the returns from investing in P2P lending could still be higher than the traditional investments even if default by issuers occurs. This is because the returns may outweigh your loss of principal after taking into account the default rate of your loans portfolio. It may sound a bit complicated for a beginner to fully understand the principles. Therefore, it’s important for you to have a thorough understanding on P2P lending and its underlying risks before you start investing. Finally, GOOD LUCK if you are now already tempted to give it a try!

 

 

 

DISCLAIMER: THE INFORMATION CONTAINED HEREIN IS NOT INTENDED TO BE A SOURCE OF ADVICE OR ANALYSIS WITH RESPECT TO THE MATERIAL PRESENTED. THE INFORMATION PRESENTED DOES NOT CONSTITUTE AN INVESTMENT ADVICE. ALL OPINIONS EXPRESSED ARE BASED ON PERSONAL RESEARCH AND EXPERIENCE AND SOLELY FOR INFORMATIONAL PURPOSES ONLY. I MAKE NO REPRESENTATIONS AS TO THE ACCURACY, COMPLETENESS AND SUITABILITY OF ANY INFORMATION. I WILL NOT BE HELD RESPONSIBLE FOR ANY ERRORS OR OMISSIONS, AND ACCEPT NO LIABILITY WHATSOEVER FOR ANY LOSS OR DAMAGE YOU MAY INCUR. SHOULD YOU CHOOSE TO RELY ON THE INFORMATION CONTAINED HEREIN, YOU ALSO AGREE THAT THE INFORMATION IS NOT LEGAL OR FINANCIAL ADVICE.

2 comments

  1. Dear Desmond,

    I would like to clarify that Funding Societies is no longer command >50% of the market shares.

    Based on the Fundaztic report card 2017/2018, total loan disbursement under P2P operators up to 30 June was RM80.28 mil. Out of which Fundaztic claimed it disbursed RM16.5 mil.

    Based on my knowledge, Finpal has disbursed RM28 mil up to 30 June 2018.

    The above 2 operators have already captured approximately 55% of the P2P market share not to mentioned other operators.

    Regards

    1. Hi Ricky! Thanks for sharing the information. I have updated my post accordingly and included the sources for the loans disbursement amounts for readers’ reference. I supposed Funding Societies had once captured >50% market share but not able to maintain it thereafter.
      https://fintechnews.my/16377/fintech-lending-malaysia/p2p-lending-malaysia-performance/

      Would be great if you could share the source of the Fundaztic report 2017/2018 for the readers as well. Thanks!

Leave a Reply