Crowdfunding to finance SMEs

Leading regional crowdfunding platform for SME financing, Funding Societies is targeting to collect RM20 million worth of investment and disbursement of financing to about 200 small and medium-sized enterprises (SMEs) within this year.

Its Chief Executive Officer Kah Meng Wong said even though this is the first time such platform is introduced in Malaysia, the take up rate is expected to be higher as the SMEs are the backbone of Malaysian economy.

Funding Societies will be focusing on two things, the first is to provide opportunities for investors to invest their fund and second to provide financing access to SMEs.

The local Fintech which was started in Singapore and Indonesia market is the latest initiative of crowdfunding which is in line with Bank Negara Malaysia’s effort to encourage more Fintech in Malaysia.

For this year, he said Funding Societies will conduct a thorough assessment of credit management in the Malaysian market before expanding its product into micro-financing.

“In Indonesia and Singapore we started with term financing and investment, and when we feel comfortable with local credit risk, we will introduce micro-financing.

“This is very interesting for investors because they can invest in small amounts. Of course it will provide financing to larger SMEs under the term financing or investment,” he said after launching the platform here today.

Meanwhile, its co-founder Kelvin Teo said financing and crowdfunding concept are proven to be successful in developed markets.

Since June 2015, Funding Societies has originated almost RM90 million in financing in Singapore and Indonesia of which only 2 per cent is default.

“Malaysia is a riskier market in the perspective of credit, macro-economic condition is volatile. We expect the default rate potentially would be higher.

“However we have taken all of this under our risk assessment. Our interest rate is between 10 to 18 percent. We expect it will give 5 to 9 per cent return to investors.

“We are not only focusing on how to collect the default debt but rather how to prevent it at the first place. In the perspective of credit, we do stringent assessment. Stringent but more flexible than banks,” he said adding that the platform is not competing with financial institution, but rather complementing the ecosystem.

Under the financing scheme, SMEs can apply loans for up to RM500,000 with the tenure of 1 to 12 months without any collateral.

It will involve SMEs under manufacturing and retail trade, construction and food and beverage.