Malaysia: Ready to embrace alternative lending
On May 2016, Malaysia’s Securities Commission (SC) issued its guidelines on how peer-to-peer (P2P) lending is to operate in the country, including requirements for the registration and obligations of a P2P operator as provided in the revised Guidelines on Recognized Markets.
In 6 November 2016, the SC had registered six P2P lending platforms – B2B FinPAL, Ethis Capital, FundedByMe Malaysia, ManagePay Services, Modalku Ventures (aka Funding Societies Malaysia), and Peoplender.
In an article on SMB Weekly, SC chairman, Tan Sri Dato’s Seri Rankit Ajit Singh, was quoted as saying the “SC’s digital agenda aims to achieve four key objectives, namely to enhance access to financing, increase inventor participation augment the institutional market and develop a synergistic ecosystem.” He was also quoted as saying “Market-based financing including P2P and [equity crowdfunding] ECF will help enhance access to financing for entrepreneurs and SME businesses in Malaysia.”
With expectations high that these P2P lending platforms will support local SMEs in their quest for better funding avenues, Fintech Innovation approached another P2P lending company, Funding Societies, on their views regarding the country’s burgeoning alternative lending marketplace. Malaysian-born Kevin Teo, one of its co-founders, spoke candidly about the business in Malaysia.
How big is the P2P lending market in Malaysia?
Kevin Teo: Based on World Bank IFC, Malaysia enterprises have a credit gap of US$ 19B. Clearly, different sources would give different estimates and P2P financing cannot address the entire credit gap. But undeniably, the credit gap is huge, SMEs contribute to 66% of employment in Malaysia and its inability to access financing has a major impact on the overall economy.
We believe P2P financing has huge potential to serve as an excellent source of alternative financing and alternative investment in Malaysia, as observed in other markets such as US, China and Europe. Since the launch of our P2P financing platforms in Singapore and Indonesia, we’ve to-date crowdfunded more than RM 50M to more than 200 SMEs in 18 months.
As Malaysians, we’re fortunate to be selected as one of the six registered peer-to-peer (P2P) financing platforms in Malaysia to widen funding avenues for SMEs. At Funding Societies, our vision is to make a positive impact in societies and we hope to contribute our part to Malaysia.
What are the issues of SMEs securing loans in Malaysia?
Kevin Teo: Even as one of the most developed economies in Southeast Asia, Malaysia have pockets of SMEs unable to get financing to support their growth. Based on a Deloitte study, 38% of SMEs in Malaysia remain under-served or unserved by financial institutions. In fact, access to working capital and business financing were ranked as the number one need for Malaysian SMEs.