BOOSTING ADOPTION OF P2P FINANCING
Funding Societies aims to enhance awareness on crowdfunding option
ALOT more investor awareness and education is required for the stronger adoption in peer-to-Peer (P2P) financing in Malaysia.
This new source of fixed income for investors has been growing rapidly outside the country in recent years. It has less volatility and a low correlation compared with the stock markets, and also offers higher returns than conventional sources of yield.
“However, certain portion of the public are still sceptical about P2P financing and perceive it as a Ponzi scheme or money game,” said Funding Societies Malaysia chief executive officer Wong Kah Meng.
“In the next three years, we expect to focus on market awareness and education of investors and small and medium enterprises (SMEs) on P2P financing, before it becomes more recognised as an alternative financing and investment option for them.
He said there was a strong potential for P2P to be an investment vehicle for Malaysians, given the desire for higher returns and more liquid investment options, which was driven by monthly or periodic repayments from P2P investing.
Funding Societies is an online marketplace connecting SMEs that seek financing with investors who are after attractive returns.
It organises regular investor events to provide information to older- and younger-generation investors who want to find out more about P2P financing.
In November last year, the Securities Commission Malaysia (SC) introduced six registered P2P financing platform operators in Malaysia to widen funding avenues for SMEs.
This makes Malaysia the first country in the Asean region to regulate P2P financing, the Securities Commision website data show.
To a question on the rigid processes the banks have in place, Wong said P2P financing was more flexible but more rigorous compared with banks when it came to approving financing for SMEs.
“For example, banks require an operating track record of three years and will typically require collateral, but we have provided financing for SMEs that have operated for fewer than three years and without collateral.
“Nevertheless, we are more rigorous as we ask them more questions and request for additional supporting documentation to get a better understanding of their businesses,” he said.