What is Peer-to-Peer (P2P) Lending?

0

P2P lending is a type of financing that enables individuals or businesses to request funds from investors via a digital platform. The platform doesn’t only serve businesses that are in need for additional funding, it also serves investors that are seeking attractive returns.

P2P Lending in Malaysia

In Malaysia, the P2P lending platforms serve the small and medium enterprises (also known as SMEs). SMEs contribute 37% of the country’s Gross Domestic Product and contributes 65% to the country’s workforce. Clearly, they are important to our growing economy. However, the biggest challenge faced by SMEs in Malaysia is the lack of financing to grow their business. Why? Because the funding amount is either too little to approach a bank or they do not meet the requirements.

P2P lending offers SMEs an alternative source of funding.

P2P Lending Sites in Malaysia

As of 2016, Malaysia is the first ASEAN country to regulate P2P financing guidelines. The Securities Commission of Malaysia (SC) appointed six P2P operators to run P2P platforms aim to address the funding needs for SMEs, namely:

Note for investors: All P2P platforms have their own way of issuing notes and onboarding investors so it’s a good idea for you to do a little bit of research before you decide. Fundaztic requires a very affordable minimum of RM50 to invest and you do not need to pay a deposit, which is actually the lowest in the market.

Get ready for the upcoming financial winter

Advantages for Businesses

  • Submitting a request for funding is easy and it only takes a few minutes!
  • Depending on the size of your funding request, you can get financing between 1-2 weeks of your application being made
  • You don’t need to offer collateral which is ideal for smaller businesses
  • You can get better interest rates as this is based on the platform’s own credit assessment and the risk profile of your company

Advantages for Investors

  • You can gain attractive returns from a diverse range of investments
  • You can study the business that you are thinking about investing with
  • You are free to choose who to lend to, so you can invest in something you believe in
  • You won’t need a lot to start investing which makes this the ideal vehicle for beginners
  • You can diversify your investments

The biggest disadvantage for P2P lending is of course the risk of the business defaulting on their payments, leaving investors with losses. This is why it’s especially crucial to ensure you know the P2P platform you are investing in as well as the business.

 

* This article is brought to you in partnership with CompareHero.my, Malaysia’s leading financial comparison website helping Malaysians make wiser financial decisions by letting compare credit cards, personal loans and broadband plans!

Share.

About Author

Webmaster