P2P Lending in Malaysia – Should you enter this investment?


The digital platforms have opened up many new investment options and we now live in a world where we are spoilt for choice on where we want to channel our funds into. One of the engines that have been promising good returns these days is the P2P or Peer-to-peer lending platforms. So, what is this and do they really work?

What is it all about?

The term P2P (peer-to-peer) means from one person to another. It is very much like eBay where you use the platform to buy and sell between people. In P2P lending, the platform is used to bridge investors to anyone needing funds to start or run a business. In other words, borrowers can use the online platforms to acquire funding for their businesses instead of having to rely on banks and financial institutions previously.

Being a new market that you can consider, be cautious not to over-invest your money. Always do your research before you take the leap because there are risks involved.

Why would anyone get into P2P lending?

The main attraction of P2P lending is that investors are promised better and higher returns. The risk profile of the borrower is normally used to calculate the interest rates by the lending platforms. You would want to get into P2P lending if you are looking for:

  • Better returns – Most P2P lending platforms promise returns between 10 and 20% which is way higher than investing in fixed deposits (about 2% per year), mutual fund (averaging about 10% at most), EPF and others.
  • Scheduled returns – P2P lending allows you to get scheduled returns and it can be monthly. In fact, you get your returns within 2 months after your first investment.
  • Initial investment – You can invest from as low as RM50 although some might be higher. But they are still low compared to other platforms.
  • Range of industries – You get to choose which sector you want to invest in whether it is in manufacturing, retail, education and such.

Is it all that good?

With all that said, it does not mean that P2P lending investment is a sure-win platform. The risk factor must be taken into consideration too (as with any other form of investment). P2P lending can be high risk as you are normally dealing with small or new businesses. Since they are mostly startups, the failure rate can be quite high. Borrowers are those who do not wish to use banks and that could be because of their credit ratings.

So, what should you do?

The most logical thing to do if you are planning to enter the P2P lending platform is to diversify your portfolio. Don’t put all your eggs in one basket. Make sure that you are entering into platforms that are legitimate and regulated by the Malaysian Securities Commission (SC). This is to ensure that your money is properly managed and protected. Do take note that any returns you make from P2P lending are taxable in Malaysia. Each of the P2P lending platforms has its own respective return rates and requirements. Be sure to check them out and calculate your returns before you decide so that your investments are protected and properly managed.

How to choose the right P2P lending platform for your business?

Most P2P lending platforms provide similar services but choosing the right one for you can be challenging since there are so many of them out there. If you are planning to venture into this platform, consider the following:

  • Types of financing – Check out whether they are offering working capital or invoicing financing as they vary in their terms and conditions. Not every product suit all types of businesses.
  • The amount for Financing – Determine how much you need and see which platform can provide you with that figure as they vary in terms of limit.
  • Additional Costs – Go through all the fees involved. There will be interest charged for sure and in cases of successful funding, there might be other fees like stamping, processing, guarantee and platform fees.

What are the major P2P lending platforms in Malaysia?

There are 11 P2P lending platforms in Malaysia which is approved by the Securities Commission (as of June 2020). This makes them registered market operators that are recognized in the country. Among them are:

  • Funding Societies – Owned and operated by Modalku Ventures, Funding Societies was approved back in November 2016, making it one of the earliest players in this market. The latest records show that it commands more than half of the market share in Malaysia while having a presence in the Singaporean and Indonesian markets. As of March 2021, the largest P2P funding platform has disbursed more than RM6.3 billion worth of funds.
  • B2B Finpal – Besides Funding Societies, B2B Finpal is another big name in the Malaysian P2P lending market. It was approved in November 2016 and has been operating very well ever since. B2B Finpal has a partnership with Credit Bureau Malaysia and has its own proprietary risk management technology. As of August 2021, it has funded more than RM297 million for SMEs.
  • Fundaztic – This is the third-largest lending platform which was formed by a group of very experienced financial experts. Providing funds and capital for SMEs and startups, it has attracted some big names in the market including Paramount Corporation Bhd.
  • QuicKash – To date, QuicKash has raised funds close to RM55 million with a low default rate of 1.38%. This platform is part of ManagePay Systems Berhad, a leading e-payment solution provider in Malaysia.
  • AlixCo – Operated by FBM Crowdtech Sdn Bhd, this is one of the fast-rising P2P platforms in Malaysia. Besides offering P2P lending services, it also provides equity crowdfunding services on its platform making it the only company in Malaysia that provides both services.
  • Nusa Kapital – Approved to operate in November 2016, Nusa Kapital is the first Syariah-compliant P2P lending platform in the world. While it is regulated by the Securities Commission, the International Shariah Research Academy for Islamic Finance is the advisor for this platform.
  • CapBay – One of the later additions to this market, CapBay was founded by several alumni of Oxford University and the London School of Economics. Since its inception in May 2019, CapBay has been making inroads in the market and has won several industry awards.
  • CapSphere – Established in May 2019, CapSphere offers better assurance for investors. It is the first asset-based P2P lending platform in the country which gives borrowers more leverage and better security and returns for investors.
  • MicroLEAP – One of the latest names in the P2P lending market, MicroLEAP is a FinTech service that is targeted in microfinance. Borrowers can raise from as low as RM1,000 through MicroLEAP.
  • Money Save – To date, this platform has funded more than 40,000 SMEs and empowered a million families in the country. The platform has won several industry awards, recognizing its products and services to help in the development and growth of the SME market of Malaysia.

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