Using the peer-to-peer concept, Funding Societies Malaysia allows anyone to become an investor, while providing SMEs with a platform to crowdfund for their capital.
KUALA LUMPUR: A Malaysian-born entrepreneur and his Indonesian business partner have started a crowd-funding company to provide financial assistance to local small and medium enterprises (SMEs).
Harvard business school graduate Kelvin Teo has embarked on an online lending platform called Funding Societies Malaysia which hopes to help Malaysian SMEs thrive and allows the average person an opportunity to become an investor.
Teo and his partner, Reynold Wijaya, whom he met at Harvard, started the company in June 2015. In less than two years, the company has arranged more than 400 loans in Singapore and Indonesia, worth a total of almost RM90 million.
Today, Teo launched the Malaysian chapter of his company, targeting 200 SMEs in 12 months, with an average of RM100,000 to RM200,000 per loan.
Funding Societies Malaysia’s concept revolves around peer-to-peer lending, a method of debt financing that allows any individual to lend money to the SMEs.
The SMEs, on the other hand, will get to borrow money directly from these individuals online instead of going through the rigorous process of borrowing from banks.
SMEs are charged an interest rate of between 9% to 18%, with an additional service charge of 4%.
Funding Societies Malaysia chief operating officer Wong Kah Meng said borrowing from Funding Societies Malaysia was better than the banks because the company offered short-term loans.
“The reason that SMEs might still be interested in us is the fact that the cost of financing is a lot lower.
“So if you have a loan with a bank that goes for up to 3 to 5 years … every monthly instalment that you have to pay is smaller. But the total interest cost that you will be paying on it is a lot higher.
“With us, the interest cost you have to pay is actually a lot cheaper,” Wong said in an interview with FMT after the launch at The Vertical here this afternoon.
He also said that unlike banks, which took a longer time to approve loans, Funding Societies Malaysia made the process easier by allowing the applications to be made online.
“We are a tech company, first and foremost. So the whole application process on our platform, as an SME, is 15 minutes.
“Once they have filled up the form, we are able to prequalify them as to whether they are a qualified SME. And we will call them to follow up within two business days. We go to them as all our guys are mobile. ”
The investors registered with the Funding Societies Malaysia can also expect to have returns of up to 16% per annum.
“Indonesia and Singapore combined, we only have a 2% default rate, which is one of the lowest in the region,” added Wong.
Teo foresees a situation where they would have more investors than borrowers.
“This was the case with Singapore and Indonesia because this is a good alternative investment.
“In Singapore, we have about 4,000 registered investors. In Malaysia, we hope to gradually build to that number and hit at least half of that number in 12 months.”
The individual’s minimum investment is RM100.