P2P financing or leading (a type of crowdfunding) is a web-based innovation that broadens the ability of entrepreneurs and small business owners to unlock capital from a pool of individual investors in small amounts and provides a quick turnaround time to obtain financing for their businesses, through an online digital platform. The digital platform serves as the middle-man or an intermediary between the requestor and the investor. Multiple investors then contribute their funds towards a request made by an entrepreneurs and small business owners (or Small and Middle Enterprises (SME)). It essentially connects SMEs seeking financing to investors seeking attractive returns.
Investing in P2P financing is like utilizing an online platform such as eBay. eBay lets buyers and sellers connect and trade goods, bypassing the need for a retailer. P2P financing is quite similar, in the sense that it connects investors and SMEs who need funds for their growth and development.
It is different from crowdfunding in that it is not concerned with rewards or equity based financial gains. P2P is more concerned with debt. A large loan is raised by collecting smaller amounts from everyone who wants to lend to you. If you are a lender, you will receive your loan back, including interest.
How does P2P lending work?
Let’s go through a P2P lending example for a better understanding.
Let’s say, Company A requests funds of RM200,000 to grow business. Company A raises this request via a P2P lending platform and offer an investment opportunity to investors. An interested investor will then choose to lend his money to Company A. Investors may choose to deposit RM100 or even RM100,000 depending on their risk appetite. The funding continues until the target of RM200,000 is achieved, at which point, the offering is closed and the funding will be given to Company A. Company A will make monthly repayments to their investors including charges. Charges for services rendered by P2P Lending Platforms may differ.
Interest rate are calculated based on the credit assessment and risk profile of the company by the P2P Lending Platforms, which they require the company to provide some key information such as financial information, business plans, the purpose of funds, etc. Malaysian Securities Commission has declared that interest rates are capped at 18% per annum with credit scoring methodologies made transparent to both investors and borrowers.
Why invest in P2P Lending?
1. Sexy Return on Investment (ROI)
The returns in P2P lending depend entirely on the risk profile of various funds. The relation between risk and returns makes it easy for investors to choose where to put funds based on their risk appetite. Yet keeping all the factors in mind, a high return rate up to 14% annually (or 25% in effective rates) in today’s market is very attractive for any investor.
2. Spreading risk with lower start up modal
With the rise of P2P lending, you get another opportunity to diversify your overall portfolio. Moreover, you can decrease risks by investing in funds that have a safer credit rating. You can also reap the benefits of diversification within the P2P lending model itself.
Some P2P lending platforms allow you to start investing from as little as RM100. By financing 10 SMEs with RM 100 each, you can spread out the risk that your RM1,000 fund will be defaulted on and protect your rate of returns.
3. Regularity in source of income
For SMEs, an efficient cash flow policy is a prerequisite for growth and development. For that, periodic cash or cash equivalent payments from P2P financing can help with the situation. SMEs will repay the funding from P2P financing in monthly installments.
A great benefit of investing in P2P lending is that it allows you to get monthly repayments, which is not always the case with stocks and bonds that usually pay dividends and income every quarter. SMEs with surplus funds too, can become investors in P2P lending.
4. Easy to maximize ROI
To maximize the returns on P2P investments, you can simply reinvest SME monthly repayments to more SME financing. Your money will work for you instead of the other way around – investing in P2P lending is an excellent source of passive income and your money compounds returns on a monthly basis.
For example, Investor A invests into a deal for 12 months with an interest rate of 14%. Without reinvesting, his net return at the end of the deal with stay 14%, as there was no compounding effect.
Investor B, on the other hand, invests on the same deal but continuously reinvests his monthly returns into other SME funds. At the end of month 12, investor B’s net returns would grow up to 25%.
5. Aiding in SME growth
In Malaysia, the SMEs are rising in parallel to the growing digital economy of our country.
SMEs are important to our economy because they make up 97% of business establishments in Malaysia; contributes 37% of the country’s Gross Domestic Product (GDP), and contributes 65% to the country’s workforce. In 2020, the government aims to push SME’s contribution to GDP to 41%.
Bearing in mind that SMEs play a critical role in the prosperity of our economy – business productivity, GDP, and the country’s employment – they need alternative sources of funding and this is where P2P lending comes into play.
Is P2P Lending safe?
This is relatively new to Malaysia, but rest assured that this business model has been around most notably in the United States, the UK and China from as early as 2005. China currently holds the record for the largest P2P financing volume in the world with a total funding distribution of USD300 bil in 2016.
In 2016, the Malaysian Securities Commission (SC) announced the regulatory framework for P2P financing, and approved six P2P operators later in the year as listed below.
The P2P framework is part of SC’s on-going effort to provide greater access to market-based financing through the application of innovative technology solutions. In fact, Malaysia is the first country in ASEAN to regulate P2P lending.
| Platform Operator | Contact Person |
Platform Website
| ||
| 1. | Nusa Kapital | Umar Munshi | hello@nusakapital.com |  |
| 2. | Finpal | Dr Lee Thean Seong | helpdesk@b2bfinpal.com |  |
| 3. | Fundaztic | Ng Wei Miem | support@fundaztic.com |  |
| 4. | AlixCo | Daniel Goettfert | p2p@alixco.com |  |
| 5. | Funding Societies | Wong Kah Meng | info@fundingsocieties.com.my |  |
| 6. | QuicKash | Ong Kooi Hooi | enquiry@quickash.com |  |
Another tip with P2P lending is to practice the virtue of
patience. The most successful P2P lending investors have hundreds of loans
across different P2P lending platforms, and most of the time they reinvest
their returns.
Terms and conditions
Contest
eligibility
To be eligible for the campaign: -
1. Sign up as a new investor within the campaign period (19 March 2018 – 22 April 2018).
2. Existing investors are not eligible to participate.
3. Funding Societies reserves the right to disqualify any
participant without notice at any point of the campaign or after should it be
found that he/she has not fulfilled the prerequisites of the campaign.
Joining the contest
The campaign period starts from 19 March 2018 – 22 April
2018
Funding Societies reserves the right to amend the campaign
period at any time without prior notice
To join the campaign, participants must go through the following
steps:
Step 1: Sign up as a
new investor during the campaign period.
Step 2: Invest a
total amount of RM1000 cumulatively or more on our peer-to-peer financing
investments before 13 May 2018.
Only ONE prize
will be awarded to each new investor.
Prize
1. At the end of the campaign, each eligible investor will
be rewarded with ONE RM30 Starbucks card.
2. Prizes are non-transferable, non-exchangeable for cash
prizes, and non-refundable.
3. Prizes will be sent via email in voucher code form in
June 2018.
4. New accounts registered through a Funding Societies
referral program or any other promotional campaigns will be awarded ONE promotion campaign reward based on
the value of the prize, whichever is highest to each investor.
Source:
No comments:
Post a Comment