Funding Societies, a p2p financing platform registered with Securities Commission under Recognized Market allows investors to invest in Malaysia’s SMEs through its platform, and in return receive interest rate from the borrowers up to 16% p.a.

P2P Financing connects investors to credit trustworthy borrowers who need financing for working capital or address short term cashflow issues.

The purposes for obtaining P2P financing are typically for facilitating trades or productions, bridging for projects and expanding business.

Hence, the investment notes are typically for short period between 3 months to 12 months. In return, investors will be obtaining interest rate of up to 16% p.a.

Just like any other investments, P2P financing does come with risk. The risk of P2P financing is the borrowers defaulting, unable to service the promised repayments.

Funding Societies Malaysia currently have a default rate of 0.5% over its 1.5-year operation in Malaysia and have disbursed over RM100 million to more than 300 SMEs in Malaysia.

Before a note is being crowdfunded, Funding Societies conducts rigorous due diligence to ensure that the borrower is credit trustworthy, and hence lowering down the risk for investors.

Funding Societies access the financial condition of a company, and credit rating of a company to determine if the company have the repayment capabilities before approving it.

However, there are ways to mitigate the risk in P2P Financing. As the minimal investment amount starts from just RM100, investors could spread the investments to different notes to avoid concentration risk.

The bigger the spread and diversified of the investment note, the lower will be lower risk for investors when a note is defaulted.

Funding Societies chief executive officer Kah Meng Wong said: “The awareness of p2p financing has grown tremendously over the past 1.5-year.

“The budget initiatives announced also suggest that the government recognises the importance of P2P financing in helping to fill the SME financing gap but also in supporting individuals to purchase their first home via property crowdfunding.”

Securities Commission Malaysia (SC) has also set in place strict regulations to ensure that P2P financing industry is well regulated.

In fact, the SC was the first regulator in Southeast Asia that took the bold move to regulate P2P financing industry in 2016. Unlike the P2P Lending in China where most are consumer facing, SC Malaysia enabled P2P financing to provide productive capital to registered businesses in Malaysia.

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