With its focus on the micro-finance sector, microLEAP aspires to empower the ‘smaller guys’.

From your small roadside food stall to your local kedai runcit in your small towns, any funding amount, no matter how small, will have a stronger impact especially when it comes to micro-enterprises in the B40 segment.

This is the belief that has taken microLEAP on its peer-to-peer (P2P) lending journey to empower micro-enterprises who are largely underserved in terms of financial services.

As a microfinancing platform that is solely focused on B40 to lower M40 micro-enterprises, microLEAP turns the spotlight on the ‘smaller guys’ who are looking for smaller amounts of funding and have found it difficult to access financing via banks and other intermediaries, while catering also to P2P investors who are looking for impact investments where a small amount of money can make a difference.

Smart Investor sits down with microLEAP PLT chief executive officer Tunku Danny Nasaifuddin Mudzaffar to talk about the company’s P2P journey, and the value-added services it offers to business owners.

Smart Investor: Congratulations on obtaining your license from the Securities Commission (SC). What services/financing solutions do you offer?

Tunku Danny Nasaifuddin Mudzaffar: Thank you. We are extremely grateful the SC sees value in our unique value proposition. As we are purely a microfinancing platform, via crowdfunding, P2P investors offer financing to issuers from as little as RM1,000 to a maximum of RM50,000 only.

On top of this, our platform caters to both investors looking to invest in Shariah-compliant notes as well as those who prefer to invest in Conventional notes. We host investment notes from a minimum tenor of six months up to a maximum tenor of 36 months on our platform.

As microLEAP targets only micro-enterprises, what inspired you to support this particular category?

We at microLEAP want to make a difference in the lives of people that we are trying to assist. When we first set out on our P2P journey, we wanted to be in a space where small investments would have a large impact on people’s livelihoods.

And that was where microLEAP was born, which is underpinned by our tagline: small steps, big impact. Any funding amount, no matter how small, will have a stronger impact on a micro-enterprise than it would on a medium sized company, more so for micro-enterprises in the B40 segment which are largely underserved in terms of financial services.

For example, it makes no sense from a costto-revenue perspective for banks to cater to microfinancing, eg writing a RM1,000 loan, due to its high costs of branches and personnel. As we are purely digital – from application, document upload, disbursement and collection amongst others – our customer acquisition costs are much lower than banks and we are completely set up to serve these microenterprises better.

In fact, we were one of the Top 18 teams that made it to the United Nations Capital Development Fund (UNCDF) Financial Innovation Lab B40 Challenge that looked to accelerate, mentor and provide training to innovative Malaysian fintech / tech companies that were looking to help the underserved.

(From left) microLEAP chief executive officer Tunku Danny Nasaifuddin Mudzaffar and chief operating officer Matthew Noel Fernandez.

Walk us through the process of how one can make an investment.

Our application process is very simple. Signup online as a user on our platform, choose to become an Investor and follow the easy steps to apply. Once you’ve transferred funds online via our FPX payment gateway into your Available Balance, you are all set. Click on an investment note to read about the Issuer and our credit rating rationale, and if you are happy with the returns then click to invest.

Investors must be 18 years old and above, and the minimum investment is only RM50. Even better, you have 24 hours to retract the investment should you have second thoughts.

To encourage users, we are gamifying our investment process and will be introducing the ‘microLEAP League of Extraordinary Investors’. Investors will earn points investing in multiple notes and investing in longer term notes. There will be monthly and yearly cash prizes; and points earned will count towards lower fees as you go up our ranks of Rookie, Apprentice, Champion and Sifu.

Who can raise funds on microLEAP’s platform, and how does one apply to become an issuer?

As per SC rules, only registered businesses are allowed to raise financing. So sole proprietors/enterprises, LLPs, partnerships, Sendirian Berhads or unlisted public companies are allowed, but personal financing is strictly prohibited.

We are start-up friendly, so as long as you have been in operation for at least six months and you are making profit to cover your monthly payments to microLEAP, then you can apply. We have a very simple Business Funding Calculator on our website which tells you how much the monthly payments will be, so we encourage all potential issuers to play around with it.

For some B40 Issuers that may not have a good credit history (perhaps they may only be cash-based), then they can apply under ‘Group Financing’. Based on the ‘Grameen Model of Group Lending’, issuers may apply as a group of five (each issuer will request their own amounts of financing).

If an issuer within the group defaults on their payments, then all the other members will be negatively credit scored and this will affect their ability to raise more funds from microLEAP in the future. This form of peer pressure or peer support has been seen to be successful and results in very low default rates. We will be rolling this out very soon.

In addition to microfinancing, what are some of the value-added services that you offer?

In terms of value-add, we provide all issuers personal accident insurance at no extra cost. That is to say that a key person or business owner is covered in the event of accidental death or disablement up to the outstanding amount of microLEAP financing.

So, if anything accidental happens to the issuer, our insurance partner will pay out to microLEAP and we will pay the outstanding amount to our P2P investors.

We also provide online training videos, at no extra cost, on basic debt management and basic accounting for our B40 Issuers for them to improve their financial literacy. This is good for our investors as they know that they will invest in micro-enterprises able to manage their debt better.

microLEAP also absorbs the brokerage fee for the Commodity Murabahah transaction (for Shariahcomplaint financing) so that for a given credit risk, there will be no difference in interest rate and profit rate between Conventional and Islamic Notes.

Can we expect continued growth in Malaysia’s P2P financing sector? What can investors expect from microLEAP in the near future?

The P2P financing sector is a very exciting place to be in at the moment. From the six licences granted in 2016, five more were approved in 2019 bringing a total of 11 regulated P2P operators. The P2P market is very much in its infancy, but with more education and further adoption of P2P financing as an alternative investment tool, we should see the exponential growth continuing in the foreseeable future.

In the near future, microLEAP will allow secondary note trading on our platform, subject to SC approval. Liquidity is key for the P2P market, and by allowing existing note holders to sell their notes in the secondary market, it will build a healthy and robust industry going forward.