As of June, close to RM377 million has been raised via the entire peer-to-peer (P2P) financing industry, which has benefitted over 1,100 small and medium enterprises (SMEs).
Funding Societies Malaysia CEO and co-founder Wong Kah Meng said most SMEs are overlooked by traditional financial institutions, which leads to P2P financing — the ideal avenue for SMEs in need of short-term financing.
In most cases, traditional financial institutions will assess financing applications from SMEs using two metrics: creditworthiness and bankability.
“First is creditworthiness — can the SME commit to the financing repayment? Second is bankability — the financing amount and tenure applied may be too small or too short, and thus not viable for banks to serve.
“Therefore, P2P financing plays a key role in supporting creditworthy SMEs,” he said in a statement yesterday.
The P2P financing was first introduced by the Securities Commission Malaysia in 2016, which has narrowed the significant funding gap faced by local SMEs, providing them an alternate capital source to fund business expansion, working capital and other financial requirements.
It is designed to be “easier” and “more convenient” with regard to documentation, requirements and long application process when looking for funds traditionally. Funding Societies also noted that the difficulties faced by SMEs in financial security are “not a reflection of their businesses being non-viable”.
“Rather, they just don’t seem to fit into the standardised traditional financing products offered by large and traditional financial institutions, including banks that mostly comprise higher value or longer-tenure pro-ducts,” it said.
Among Funding Societies’ clients is Heron Solutions, a company offering various home and business security solutions.
Heron Solutions co-founder Ben Zainal said short-term financing is important especially for young business owners.
“Maintaining cashflow is crucial for all businesses, especially new ones like ours. This is because being at the early stage of business means we must secure as many customers as we can, and this also means adhering to our clients’ financing terms.
“Due to this, we need financing support from time to time to maintain orders, services and operation expenses,” he said.
Most SMEs supported by Funding Societies are from key sectors, including wholesale, retail trade and manufacturing, whereby the platform was the first to have raised a total of RM128 million in Series A and B funding.
Present also in Singapore and Indonesia where it is known as Modalku, it has reached RM2.6 billion in total working capital disbursement to SMEs in South-East Asia since its establishment.
This article originally appeared on themalaysianreserve.com