Leading multi-bank supply chain financing platform CapitalBay provides smart and inclusive financing to SMEs
Armed with a fresh approval from the Securities Commission Malaysia (SC) to operate a peer-to-peer (P2P) financing platform, awardwinning Malaysian multi-bank supply chain financing (SCF) platform CapitalBay is on a mission to provide smart and inclusive financing to businesses across Southeast Asia.
Established in 2016 by Ang Xing Xian, Edwin Tan, Dion Tan and Darrel Ang, CapitalBay is approved as the first and only licensed multi-bank SCF platform in Malaysia by the SC. Since its establishment, the company has funded over 2,000 transactions worth over RM90 mil.
Smart Investor talks to CapitalBay director Darrel Ang about how supply chain financing can overcome small-and-medium enterprises’ (SMEs) financing and supply chain obstacles.
Smart Investor: Tell us more about CapitalBay and the financing services it offers?
Darrel Ang: CapitalBay is a P2P financing platform specialising in supply chain financing that handles all financing servicing on behalf of matched investors and business borrowers. The financing products and notes we offer have short tenure and are triggered by trade events happening in the physical supply chain.
The capital raised for local SMEs by banks and non-bank platforms is still a long way from sufficient, with a massive funding gap of up to RM80 bil, as estimated by the SC. SMEs face high rejection rates on their financing application due to the traditional loan product structure and assessment.
SCF is an innovative technique that enables SMEs to access financing using their supply chain data and relationship. This is a leap forward from the traditional term financing product which relies mainly on assessing the SME’s historical financial position.
The emergence of this new competitive landscape is closely associated to the chronic short-term cash flow problems arising from long payment terms and availability of new forms of trade data, granting immediate visibility to upstream and downstream physical supply chain events.
Invoice financing (also known as factoring) is one of our core financing services we offer to business borrowers. It allows SMEs to get early payment on their outstanding invoices. For example, when a business requests for financing on their invoices, the goods and services have already been delivered. These invoices are further validated by their corporate customer on our platform before channelling as notes for funding, making them significantly less risky.
Our leading industry position in SCF is further endorsed by The Asian Banker with the “Best FinTech Platform for Supply Chain Finance in Asia Pacific” in 2018 and “Best Financial Supply Chain Management in Malaysia” awards in 2018.
How has the market viewed SCF investments?
Invoice financing notes are the hottest notes in the market and they are usually snapped up very quickly. Since March 2017, we have facilitated well over 2,000 invoice financing transactions, and are currently averaging over 50 transactions per month, nearly double of what is available on the leading P2P platform. The average returns of our invoice financing notes for existing investors is over 10%.
What is the reason for the popularity of SCF investments?
The SCF notes are popular because they have the shortest tenure of three months whereas term financing can stretch up to 36 months. Many investors view it as a higher-return alternative to placing their money in fixed deposit. Being shorter tenure has all the advantages, because they can automatically reinvest their returns and diversify investments over time.
Another key feature of CapitalBay’s investment notes is that they are relatively much safer. SME invoices that are financed through our platform are associated to large and reputable corporate buyers, typically a government-linked corporation, public-listed company or multinational corporation.
As invoice payment is collected directly from the large corporate buyers, non-repayment risk is significantly low. This risk is further mitigated with the ability to pursue settlement directly with the SME supplier should their corporate buyer fail to make the repayment.
The main advantage of investing on CapitalBay’s platform is that individual investors will be investing in high-quality deals alongside banks and financial institutions. We utilise machine learning to do credit evaluation on over 2,000+ data points gathered and experienced credit underwriting professionals to validate deals. This data-driven approach has kept our default rate near 0%.
How is CapitalBay different from the other platforms?
CapitalBay positions itself as a premier platform of choice for investors with means. We have differentiated ourselves in how we serve it. We are positioned to deliver better services than all other platforms. We provide investors with a relationship manager who will provide alerts, special offers and support. We are keen to speak with financial planners and wealth managers about the benefits of recommending investment on our platform to their clients.
We will be introducing first-in-market Auto Invest features which will allow our investors to best deploy their funds according to their preferences with minimal effort. Together with the short-tenure nature of our notes, this makes it a very attractive option to place idle cash in your portfolio.
How do investors start?
CapitalBay is launching its P2P platform in November 2019 for early group of investors. Investors interested to get early access can register here at www.capitalbay. com.my/invest. The platform will be opened to the public a month or two thereafter.