As most of us already knew, Bank Negara Malaysia (BNM) decided to reduce the Overnight Policy Rate (OPR) to 3% at its last meeting on 7 May 2019. This was the first time of OPR cut since July 2016.
Historical Movement of Malaysia's benchmark interest rate (Overnight Policy Rate)
Consequently, the ceiling and floor rates of the corridor for the OPR are correspondingly reduced to 3.25% and 2.75% respectively. This in turns will affect all the borrowing rates in Malaysia.
What's the lending rates from various financial institutions following the cut?
Here you go...
Note: * Indicative effective lending rate refers to the indicative annual effective lending rate for a standard 30-year housing loan/home financing product with financing amount of RM350k and has no lock-in period. As at 24 May 2019 Bank Negara Malaysia
In this last article of P2P investment series, we would like to highlights these 5 common mistakes that every P2P investors must avoid. Let's get it done right!
Like any other type of investments, P2P loan investing comes with risks also. The biggest concern here is default risk of a investment note. If banks also has non-performing loan category, why not for P2P lending? It's basically the same kind of underlying, which is a loan. Moreover, don't forget the liquidity risk also because investors can't simply withdraw money out once it was being lend out. You have to wait until the maturity date of that particular note.
Mistake #2: Only look at Return (Interest) of a Note
Yup. High return/interest being published is attractive for all of us, especially for P2P investors. This is one of the main reason why we invested in P2P loans in the first place. Right? However, only looking at return and neglecting the risk grading of an investment note would increase your chances of facing default risk.
Mistake #3: Lack of Diversification of Notes
So, investors must diversify and spreading their money into different kind of notes, comprising return and risk grade. This is very crucial whether you can succeed in P2P investments. Just like unit trust funds, we invest in it because of the beauty of diversification. It's advisable to invest for example RM100 in each note for diversification purpose. The process is difficult and slow? Well, we would rather slow than risky. Furthermore, platforms such as Funding Societies and Fundaztic have auto-investfunction (click here) which makes diversification process simpler.
Mistake #4: Too Concentrate and Only Use a Single Platform
If you're reading until now, and still not yet open a P2P account, then this would be one of the biggest mistakes in your life. Hahaha. This new type of investment is simple and quite attractive and it's definitely a good diversification instrument for your whole investment portfolio. Other than stocks (which is more risky), unit trust, property... why not add one more called P2P investment?
If you still haven't open any P2P account, you may do so here:
With this feature, investors have an option to allow our platform to perform auto-investments on behalf of them based on each investor’s investment criteria and conditions. The auto-investments will be deducted from the investor’s available balance and the platform will not auto-invest if there is insufficient balance in the account.
Here are the step-by-step guides on how to activate and set your investment conditions.
First, you must first have a minimum of RM2,000 in your AVAILABLE BALANCE to set-up Smart-Invest.
Click “Smart Invest” on your homepage.
Next, click “Add Setting”.
Insert the amount that you wish to invest in the Notes. Next, choose your desired range for the Note’s Tenure, followed by the range of the Interest Rates you would like to receive and finally the Risk Grades.
Select “Active” and click “Submit”.
You can now view your Smart Investment conditions saved in your “Smart Invest” tab.
Terms & Conditions:
You may setup up to a maximum of 5 active Smart Investments at any point of time.
Once your Smart Investments are setup, the platform will filter for new and/or current Notes that are available for funding every 10 minutes. And if your conditions are met, the platform will auto-invest your desired amount into the Notes.
The platform will NOT auto-invest into any Notes that the Smart Invest system have already invested in or if the Notes are already fully funded.
However, the Smart Invest feature WILL still invest in Notes that you have previous MANUALLY INVESTED in which the Smart Invest system have yet to invest in.
When setting up the Smart Invest setting, please make sure your set the highest priority conditions that you want first followed by the 2nd and so on. This is because the system will take your first Smart Invest setting as your main priority and invest based on that condition first. if it doesn't meet the first condition, only then it will invest based on the 2nd condition, etc.
As the Smart Invest feature has invested based on your first condition, it will not invest in the same Note again even-though that same Note also meets your 2nd, 3rd, etc. conditions.
NOTE: You will not be able to edit/deactivate/delete or make any amendments to your Smart Invest settings if your available balance is below RM2,000. However, the Smart Invest system will still auto-invest on your behalf even if your available balance is below RM2,000 as long as it meets your settings criteria.
Funding Societies's algorithm works by first running through all the filters to see which investors have the settings that matches the loan. Then it will check the total amount of all investors that are on auto-invest. A percentage of the financing term amount (between 20% to 40%) will be left open for manual investing.
Funding Socities web-based
To make things easier, you can simply setup via mobile app version as shown below:
Please take note that there are two types of funding available on Funding Societies platform - Term Financing and Invoice Financing. So, do setup auto-invest feature for both types of funding (suggestion only).
If you still haven't open any P2P account, you may do so here:
As promised, this topic has investors scratching their heads and curious about when choosing which P2P platform to starts investing with. Here, we selected the two most popular platform and do a simple comparisons between them.
The battle begins here: Funding Societies vs Fundaztic Generally, both operators are run by experienced and professional teams and are equally good. It's just that the features are a little bit different and how they assess the credit profile/scoring of the issuers would remained as a business secret.
Personally, admin feel that Funding Societies platform (website or mobile app) is more user friendly. However, admin does really like the features of credit ratings published on the Fundaztic platform which helps investors to know the identify risk scoring and also the probability of default percentage (PD %).
In conclusion, Funding Societies are aiming for bigger size of amount to be funded, while Fundaztic is actively going for numbers of SMEs to be funded. Both has a different strategy of market approach. Hence, Funding Societies is leading the pack with funded amount, while Fundaztic is leading in terms of numbers of deals funded.
So, which one is better? We have compared for you now, and it's time for you as an investor to make the final call. Anyway, why choose only one while you can have both accounts open?
After understanding how and why P2P lending existed nowadays (click here to read our previous article), let's move on knowing all the approved P2P operators in Malaysia now.
Below is the intro of SC approved P2P operators (as at end Aug 2018):
B2B Finpal Sdn Bhd (B2B Finpal)
* A local P2P lending player founded by two prominent businessman.
* Its parent company B2B Commerce Sdn Bhd has extensive experiences in providing supply chain management software to SMEs.
* Thus, it already has a customer base that includes companies in retail, fast-moving consumer goods, oil and gas, manufacturing and logistics across the region.
Ethis Kapital Sdn Bhd (Nusa Kapital) * The world’s first regulated Shariah-compliant P2P Crowdfunding Platform. * Founded by experienced individuals with regional SME industries exposure. * Focusing on projects that are both commercially viable and socially responsible for its crowd of ethical and Islamic investors.
FBM Crowdtech Sdn Bhd (Alixco)
* The only Registered Market Operator in Malaysia that operates both P2P financing and Equity Crowdfunding (ECF) * A Swedish-based company, is the fastest growing crowdfunding platform in Europe with more than 86,000 investors across 196 countries; raising over EUR 37 million for 472 companies.
Modalku Ventures Sdn Bhd (Funding Societies with referral code: jf95qsa4) * Founded by two Harvard university students * A regional P2P lending player operating in Singapore, Indonesia and Malaysia. * Bringing with it the best practices from it's experiences in regional markets. * Having a track record of maintaining default rate at below 2%.
Peoplender Sdn Bhd (Fundaztic with referral code: HndCCl) * Founded by prominent ex-bankers and top executives of the banking/credit industry. * Bringing with them more than 50 years of combined expertise in finance, legal and technology.
QuicKash Malaysia Sdn Bhd (QuicKash) * A unit of Bursa Malaysia listed company, ManagePay Systems Bhd. * Leveraging on MPAY's deep understanding of the fintech industry.
In our next article, we will blog about the differences between two of the most popular P2P operators. Stay tuned!
Peer-to-peer (P2P) financing 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. P2P Financing is already a well-established concept in the USA, UK, and China, amongst many other countries.
Instead of the traditional ways of sourcing funds from financial institutions (which normally takes longer processing time and stricter rules), P2P financing serves as an alternative financing method for SMEs to raise funds for working capital or business expansion.
How does P2P work?
P2P operator facilitates businesses or companies to raise funds from both retail and sophisticated investors through an online platform. Through the SC registered P2P platform, an investor may invest in an investment note or an Islamic investment note issued by businesses or companies for a specified tenure with the expectation of a predetermined financial return.
How does an issuer (company) raise funds through P2P? When an issuer applies for funding, the P2P operator will evaluate the issuer’s suitability, among others, by assessing its capacity to repay through credit history checks and analysis of any alternative data. These factors allow the P2P operator to assess and assign a risk score to the investment note or Islamic investment note issued by such issuer. Such issuance will then be hosted on the P2P platform where investors will then select and invest accordingly.
How does an investor invest through P2P?
In general, upon understanding and analysing the information disclosed by issuers concerning its business, financing purpose, and financial information; credit assessment; repayment schedule and risk information published on the P2P platform, an investor will then make an informed decision on the issuers and amount they wish to invest in.
"For example, Issuer X issues an investment note which seeks to raise RM100,000. The investment note is rated “A” with a rate of return 0.5 percent per month for a 12-month period.
Therefore, the investor that chooses to invest in Issuer X in such amount he so decides, he will receive monthly repayments (principal and returns) for the duration of the investment note."
Anyone also can invest in P2P? Yes. P2P investment opportunities are open to all investors. Retail investors are encouraged to limit their investments exposure on any investment note or Islamic investment note executed or offered on or through a P2P platform to a maximum of RM50,000 at any one time in order to manage their risk exposure.
However, retail investors should be aware and cautious of the risks of investing in investment note or Islamic investment note beyond the advised RM50,000 threshold.
Good. What's the interest/return like?
Depending on the risk scoring of the issuer, an interest rate from 8% up to 18% is expected from an investment note. However, please take note that the higher interest rate offered means the higher risk of default as well. Anyway, the average simple interest rate offered by most of the issuers are within the range of 10% to 14% per annum. It's pretty attractive to most investors.
Is it risky to invest in P2P notes?
The only risk of P2P investing is the default risk of the issuer. So, the credit assessment performed by a P2P operator is crucial to determine the risk and published relevant information to investors to make an informed decision, whether or not, to invest in that particular note.
Considering that the primary objective of introducing market-based financing is to help build small businesses which in turn help to spur and promote the growth of the economy, hence the P2P operator is NOT permittedto facilitate individuals seeking personal financing.
In Malaysia, ONLY locally registered sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies can raise funds via a P2P platform. Unlike some other countries, Malaysia has more stringent rules in place, hence relatively safer for investors.
Trust Account?
Yes. Similar to unit trust investment structure, a P2P operator must ensure that monies obtained from investors and issuers are placed in a third party trust account until the appropriate disbursements are required to be made. This is to avoid the misappropriation of investors' monies by P2P operators.
List of Approved P2P Operators as at Aug 2018 May 2019:
B2B Finpal Sdn Bhd (B2B Finpal)
Ethis Kapital Sdn Bhd (Nusa Kapital)
FBM Crowdtech Sdn Bhd (Alixco)
Modalku Ventures Sdn Bhd (Funding Societies with referral code: jf95qsa4)
PeoplenderSdn Bhd (Fundaztic with referral code: HndCCl)
QuicKash Malaysia Sdn Bhd (QuicKash)
Bay Smart Capital Ventures Sdn Bhd - new
Capsphere Services Sdn Bhd - new
Crowd Sense Sdn Bhd - new
MicroLEAP PLT - new
MoneySave Capital PLT - new
Preliminary Peer-to-Peer Key Statistics (as of June 2018)
In our next article, we will blog about each of these P2P platforms in Malaysia. Stay tune!
