Continued appeal for P2P lending

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THE pandemic has certainly accelerated the acceptance and adoption of digital finance by businesses and individuals in Malaysia.

As more businesses sought new sources of capital during last year’s economic downturn, peer-to-peer (P2P) lending platforms performed better and disbursed record amounts of funds to micro, small and medium-sized enterprises (MSMEs).

Given the circumstances, Fundaztic Managing Director Calvin Foo said his platform has done quite well.

“Compared to previous years, I would say we have done a fantastic job considering the situation we have had to overcome with the pandemic and the ongoing restrictions. None of our accomplishments would have materialized without the efforts of the Fundaztic team.

“2021 was our most successful year since we started in 2017 and Fundaztic managed to disburse over RM140 million to 2,100 underserved MSMEs in its fourth year,” he says.

He notes that with the acceleration of digital business transformation efforts in Malaysia, P2P lending is expected to continue to gain traction as an alternative financing option for MSMEs.

Additionally, the platforms now offer short-term funding options and allow easier access through online applications.

This will further enable MSMEs to harness the resources to expand their businesses and increase their incomes with as little hassle as possible.

In an earlier statement, P2P site Funding Societies Malaysia also noted that its funding deals increased by 100% in 2021 from a year earlier, while the default rate remained at around 3%.

The platform says growth is underpinned by a risk-adjusted business model and underwriting after learning some lessons from the challenges and uncertainties it has faced over the past two years.

Finance companies also recently passed the RM1 billion disbursement mark, with business finance approved through over 17,000 finance deals to support underserved and creditworthy MSMEs across the country.

“The pandemic has ushered in a new era of digital inclusion. This simultaneously allows us to grow further by reaching more of these creditworthy MSMEs, in line with their increased awareness of digital finance platforms.

“This RM1bil disbursement milestone is a reflection of the thousands of underserved, creditworthy SMEs we have supported over the years, not only in Malaysia, but across Southeast Asia,” said the co-founder. and CEO Wong Kah Meng.

Foo says P2P lending continues to attract a wide variety of businesses.

According to data collected on the Fundatic platform, the services sector currently constitutes the bulk of issuers with 28% of all notes issued, followed by retail (19%), wholesale (15%) and food and beverages (11%).

Although still relatively low, Foo adds that the percentage of ratings issued to e-commerce players (4%) has quadrupled in the last 12 months.

“This is in line with recent economic trends that see more Malaysians shopping online due to prolonged closures of physical storefronts.”

Foo remains optimistic about disbursement this year.

Fundaztic aims to pay over RM100 million to 1,800 underserved MSMEs through more innovative products.

As it enters its fifth year of operation, Foo says the platform will review all of the feedback and data it has gathered so far to determine whether its initial startup goals have been met. It will also help him identify areas for improvement.

Five years, after all, is a crucial step.

“While we remain optimistic about our P2P market share and the growing community of investors, it is our duty to review the platform, its processes and its functionalities to keep it optimized and up to date.

“One of Fundaztic’s plans for the first quarter of 2022 is to improve the entire onboarding and application process for MSMEs so that they have an even faster and seamless experience on the platform,” said he declared.

He adds that Paramount Corp Bhd’s investment will help him improve his user experience and stay ahead of the game as the financial industry becomes increasingly digital in the coming years.

Last August, Paramount completed the acquisition of a 30% stake in Omegaxis Sdn Bhd, the holding company of Peoplender Sdn Bhd which operates Fundaztic, for RM13.7 million.

But Foo says he also hopes to work with other institutional organizations to provide more attractive options for companies of all sectors and backgrounds, while cultivating an ecosystem that offers investors a wealth of ways to diversify their investments. and build a strong portfolio.

Notably, given the market volatility, investors are also looking for alternative investment options, which could see more funds flow into P2P.

Foo says Fundaztic will leverage every advantage it can get to raise the bar for the platform and the P2P industry this year and beyond.

However, greater awareness of digital finance solutions is crucial for P2P to move to another level of disbursement. On the one hand, MSMEs need to be more familiar with non-bank lending and, on the other hand, investors need to be open to more alternative investment options.

“Knowledge of P2P financing is essential to generalize the acceptance and adoption of the digital solutions offered by Fundaztic. Although this has steadily increased in recent years, we believe that there are still local businesses and individuals who are unaware of the flexibility that P2P financing offers compared to conventional financing institutions.

“Therefore, we will continue to engage with our investors and the general public via online discussions, forums and seminars to share best practices in P2P funding and advice on how to get the most out of the platform. -shape for various financial goals,” says Foo. .

Finance companies, meanwhile, are also optimistic about its growth trajectory this year, having established more than 60% market share in the space.

“Based on our forecast, we plan to disburse over RM500 million in funding this year, with the strong support of all our stakeholders,” says Wong.

“Our achievement (last year) was particularly significant given that the past two years have been anything but normal.

“However, there is still a lot to be done to improve access to finance for MSMEs. Outreach and collaborations are critical to our growth and to that end, we look forward to more successful partnerships with government as well as industry partners to expand our reach,” he adds.

By providing equal access to finance to MSMEs, finance companies aim to stimulate the post-pandemic economy by making available to the segment various financing products, programs and initiatives.

Regionally, the platform reached RM8.5 billion in total funding disbursement in January.

In its first regional impact study published late last year, which looked at the platform’s impact in the countries where it operates – Singapore, Malaysia and Indonesia – it found that 72% of Respondents said their income would have decreased without funding for platform activities.

Meanwhile, 84% of businesses surveyed had used the financing as working capital to pay for overhead, inventory and business equipment, all of which were crucial in their efforts to maintain operations.

Finance companies also performed well in its investor segment. Although investment returns have been hit across most asset classes, investments in digital finance platforms continue to hold up.

The platform has onboarded over 50,000 investors to date. It has also introduced several new investment products over the past year to meet the needs of investors actively seeking to diversify their portfolio.

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