Malaysia to see big jump in P2P financing
KUALA LUMPUR: Malaysia could see a big jump in peer-topeer (P2P) financing in 2019 as the awareness level rises, says to Funding Societies Malaysia (FSM).
According to FSM chief executive officer Wong Kah Meng, P2P financing industry is expected to continue thriving with an anticipated 300 per cent growth to RM300 million in 2019 (compared with RM100 million in 2018).
Against the backdrop of the Budget 2019 announcement which suggested a more proactive role of P2P financing in alleviating the financing gap encountered by both the micro, small and medium enterprises (SMEs) as well as first-time home buyers, prospects are bright for growth acceleration, he added.
“The awareness of P2P financing has increased since the issuances of operating licenses to six platforms in November 2016,” Wong pointed out.
Altogether, these platforms have been able to fulfill the
The awareness of P2P financing has increased since the issuances of operating licenses to six platforms in November 2016. Wong Kah Meng, FSM chief executive officer
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 envisaged.
From its own perspective, 2018 has proven to be a strong year for FSM as it is on course to post a 600 per cent 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 noted.
“Henceforth, we are projecting a RM300 million growth in 2019 in view of strong demand from both the SME and investor communities.”
FSM which commenced operations in Feb 2017 disbursed RM17 million that year.
In 2018, the disbursement quantum jumped exponentially by almost 600 per cent to RM121 million as of December 24. The company has disbursed more than RM1 billion in SME financing across Southeast Asia.
Currently, Funding Societies Malaysia commands more than 50 per cent market share of the total amount raised in Malaysia’s P2P financing industry.
“On the investors’ side, our rigorous credit assessing process has enabled us to keep our default rate at less than one per cent,” Wong revealed.
“This has raised the confidence level of potential investors to have faith in our investment notes that offer returns up to 12 per cent per annum,” he added.
Elaborating further on risk factors often associated with P2P financing, Mr Wong Kah Meng explains that 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 per cent.”
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 its zenith of 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.