2019 was a strong year for Malaysia’s peer-to-peer (P2P) financing industry as total financing increased to RM521 million cumulatively and is expected to continue to thrive in 2020 with RM 1 billion in total financing, according to Funding Societies Malaysia.
2019 performance review.
In 2019, the country’s largest P2P financing platform, Funding Societies, disbursed RM 400 million in financing to SMEs, an almost 250 percent increase from the year prior of RM 114 million. This strong growth has benefited over 1,000 micro, small and medium enterprises (MSMEs) in Malaysia.
Funding Societies has more than 60 percent market share of the P2P financing industry in Malaysia and is the largest platform across Southeast Asia, having disbursed more than RM3 billion in financing.
Wong Kah Meng, Co-founder and Chief Executive Officer of Funding Societies Malaysia, said, “2019 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. As one of the key pillars of the fintech industry, P2P financing is a key ingredient for enabling inclusive growth for digitally-inclined MSMEs.”
On the investor front, Funding Societies Malaysia has onboarded more than 40,000 investors to- date. Whilst 2019 has seen an increase in the number of defaults, Funding Societies has maintained a 2 percent default rate.
“Whilst the risk of default is natural for all businesses, we have successfully maintained a 2 percent 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 whilst investing. To that end, we have successfully recovered or restructured more than RM10 million, benefitting investors, after thorough negotiations and disciplined follow-ups with SMEs,” Wong commented further.
Securities Commission recently standardised the default rate definition for P2P financing to ensure better consistency and transparency across platforms to enable investors to make better-informed decisions.
Outlook for 2020
As the Malaysian government seeks to boost MSMEs’ GDP contribution from 38 to 50 percent by 2030, MSMEs are being supported through various incentives announced during Budget 2020, with more than RM1 billion in budget allocation to drive SME growth and activities.
“In addition to the RM 100 million in government financing through the My Co-Investment Fund (MyCIF) 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 grows,” remarked Wong.
“Based on our recent growth and outlook for 2020, we expect to disburse RM 500 million in
financing this year, supported by robust demand from MSMEs and investors. With greater
awareness and on-going 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 concluded.