Funding Societies*, an SME digital financing platform in Southeast Asia with presence in Singapore, Indonesia and Malaysia, Funding Societies has facilitated more than 1 million business loans to SMEs through a base of more than 150,000 individual and institutional investors in the last 4 years since inception in 2015. Funding Societies expanded its loan volume by 3 times in the last 12 month stating a default rate of 1.5%. Funding Society claims this to be the highest amount given out by any SME digital financing platform in Southeast Asia.
Funding Societies Founders Kelvin Teo and Reynold Wijaya
The growth in SME loans with Funding Societies is reflective of the increasing openness amongst businesses towards new generation funding options. As per the EY, UOB and Dun and Bradstreet report â€˜Asean SMEs – Are you transforming for the futureâ€™, 67.8% of the SMEs are now open to non-traditional lenders including lending platforms. Alternative financing providers like Funding Societies are addressing this segment by providing technology backed funding solutions for the growth of local businesses.
Kelvin Teo, Co-Founder and Group CEO of Funding Societies, commented, ‘What SMEs need is not subprime banking, but a different banking. Weâ€™re honored to have partnered with many SMEs in their growth journey. It hasnâ€™t been easy, as SME financing is a patient business. We hope to work even closer with SMEs in 2020, in line with our belief of â€˜stronger SMEs, stronger societiesâ€™ since 2015.’
Funding Societies specialises in all forms of short-term unsecured financing up to 2 million SGD, with funds disbursed as early as the next day. Funding Societiesâ€™ SME clients ranges from micro businesses and SMEs to small listed companies looking for working capital financing. For platform investors, the minimum amount is low starting from 20 SGD per investment. Other than individuals Funding Societies also has regulated financial institutions and funds who invest into loans on the platform.
Funding Societies is backed by Sequoia India and Softbank Ventures Asia Corp.
liwwa is a marketplace lending platform that provides funding to small and medium businesses in Jordan. Our mission is to support job and income growth in the region. To date we have underwritten about 10 million USD in loans. This has helped to create 475 jobs in Jordan, 1.77 million USD in income, and 13.05 million USD in economic output.
What are the three main advantages for investors?
The type of investors we target are financially-savvy professionals who already have a portfolio of investments. They are attracted to our service because it is a way for them to further diversify their existing portfolio. The other advantage is that there are no big barriers to testing out the platform – provided he meets certain basic criteria, anyone can register and there is no minimum amount required in order to start lending. Once an account is activated and the investor is ready to get started, the power of choice is in his hands. He is able to browse the various campaigns, read through the credit scoring and business information and select which ones to participate in. A final advantage to using liwwa is the relatively high returns; our Internal Rate of Return across the liwwa portfolio stands at 9.45% for the last 12 months.
It is important to note that the investment is unsecured and therefore a high risk one. This means that if a borrower defaults on his loan then the investor stands to lose any money that he has funded to that particular business and not yet been repaid. We aim to disclose as much information on this risk as possible throughout our website. We also keep investors regularly updated on progress to recuperate the funds in the event of a late payment from the borrower.
What are the three main advantages for borrowers?
There is a 240 billion USD capital access gap in the MENA region. For borrowers, we provide a much-needed alternative to bank financing. The liwwa financing proposition is attractive because we do not require collateral, and because we offer an extremely swift process. We are aware that most borrowers are in need of purchasing supplies or assets rapidly to continue growing their businesses. We commit to reviewing all applications within 48 hours. If an application is approved, the borrower is able to access funding straight away. And finally, we are transparent and we do not charge any up-front or additional fees. A Murabaha rate that an approved borrower is offered is directly related to the riskiness of his business, as determined by the credit assessment and the resulting credit score. Our friendly customer service team ensures that applicants are well informed throughout the process.
What ROI can investors expect?
The return on investment that investors can expect is directly dependent on their risk appetite. Generally speaking and assuming no defaults, an investor who puts all of his funds in low-risk campaigns is likely to make a lower IRR* than an investor who funds only medium- or high-risk campaigns. We encourage investors to diversify as much as possible across risk level as well as sector and loan tenor. Our current liwwa index stands at 9.45% for the last 12 months.
*The liwwa index reflects IRR, or Internal Rate of Return. More information on the Internal Rate of Return can be found at the following link: https://www.liwwa.com/help/irr
Is the technical platform self-developed?
The technical platform is self-developed to the extent that the proprietary data is all owned and managed in-house. There is a large focus on predictive modeling, and on collecting enough data to leverage this more in the future as a means for building efficiencies into the credit assessment process.
How is the company financed? Is it profitable?
The company has raised 5.55 million USD from investors and 6 million USD in debt to date. Our investors include Silicon Badia, Bank Al Etihad, DASH Ventures, and Samih Toukan. Our investors include a number of banking partners Bank Al Etihad, Capital Bank, Arab Bank, and Ahli Bank.
We will achieve profitability in 2018, and we are currently working to close a Series B round of investment.
What were/are the main challenges of the market you address?
IFRS 9, with its provisioning rules, is one of the main drivers of banks’ reticence to lend to SMEs. The market demand for loans hasn’t appreciably changed, and one could argue that market risk has stabilized in many MENA economies – so the accounting rule change is having an outsized impact. Companies like liwwa are poised to fill a need because much of the debt that liwwa manages is treated on an off-balance sheet basis. Retail lenders and non-bank institutions can contribute to filling the SME lending gap given a difference in risk appetites and a more generous perspective on solvency ratios.
Is Liwwa open to international investors?
liwwa is currently open to investors from the MENA region and Malaysia. We cannot unfortunately on board investors from other regions at this time due to strict compliance regulations imposed by some countries like the United States. We are working to be able to offer our services more widely in the future.
Which marketing channels do you use to attract investors and borrowers?
Our investors and borrowers are two vastly different audiences, and our marketing strategy reflects this.
For investors, marketing is varied and a combination of word-of-mouth, digital and more traditional forms of ATL advertising, the latter something we have recently started scaling up. We recognize that investors will want to know more about the company and want to trust in it before they start actively investing, and this make take time. Through all forms of advertising we encourage potential investors to learn more about us and we provide a lot of transparency to facilitate this. For example, anyone can read through our portfolio results www.liwwa.com/help/stats, or our blog blog.liwwa.com where we provide insights into how we work and articles on technology and investment.
For borrowers, social media marketing has been an important and cost-efficient tool for us. We also rely on a Sales team to spread awareness and build relationships with potential customers. As a result of our investment in maintaining customer satisfaction throughout the whole application journey, repeat borrowers currently make up nearly 50% of our portfolio.
Where do you see liwwa in 3 years?
The medium- to long-term focus is on continued improvements to our credit assessment process using technological efficiencies. In the next few years we will have a vast amount of data on the market that we can better leverage for predictive modeling. This means that we can gradually rely more on a combination of predictive modeling and manual credit assessments, minimizing the latter part as the former increases in accuracy.
This will contribute to making the liwwa model easier to replicate in other markets and, given the vast demand across the MENA region, we are targeting to roll out to other MENA markets.
We are still focused on our base of operations in Jordan, and the country will always be an important market to us.
Incomlend is a unique invoice exchange connecting businesses and private funders on a global level. The Incomlend platform serves as a marketplace where funders with capital can purchase trade receivables from suppliers at a discount. As a result, Funders get profit from the discount, while the Supplier get cash on the spot.
What are the three main advantages for investors?
We are the first platform in operation to fully insure the capital of our funders against Buyer payment default on all of our trades. Our Credit insurance is provided by a world leading insurer specialized in international Trade finance.
Furthermore, funds are secured on a segregated account managed by an independent trustee, limiting the risk of funds misuse by the platform.
Global scope. We are the first platform to offer funders an unprecedented worldwide diversification opportunity allowing them to be positioned on multiple countries and currencies.
Profitability. By accessing our invoice discounting trades, funders benefit from superior return levels as compared to current options for short term liquidity placements. The invoice repayment cycles are short (up to 120 days) allowing investors to accelerate capital rotation and profit, while keeping liquidity accessible in the short term.
What are the three main advantages for borrowers (Suppliers)?
Global Scope. We are a natively international platform, offering Suppliers to fund their Export receivables in multiple countries and currencies, while also covering their domestic receivables.
Funding flexibility: We provide Non Recourse funding and require No collateral. Suppliers can access funding without long-term contracts or obligation to channel all the sales through the platform are required. Funding is provided off balance sheet, allowing SMEâ€™s to keep their indebtedness intact.
Funding efficiency: 100% of funding requests on the platform are filled, funding lasts less than a day on average.
What ROI can investors expect?
More than 10% return annualized, net of fees, if capital reinvested on an annual rolling basis.
How does Incomlend rate the creditworthiness of invoice sellers and invoice buyers?
Our main focus is on the Buyer payment risk, as funding is provided non-recourse to the Supplier. The Buyer payment risk is covered by a worldwide credit insurer, which applies its own internal rating to each Buyer prior to onboarding on the platform. Each Buyer must be rated between 1 to 5 (out of 10, 1 being no risk and 10 being high risk), as per our Credit Insurerâ€™s classification.
Incomlend does not provide so far an internal rating on Suppliers, as the risk is not borne on them and as any type of internal rating would be considered as Financial advisory, requiring specific financial licences under the Singapore regulation.
Incomlend provides objective data on the features of the Buyer-Supplier relationship map, such as invoice confirmation, goods confirmation, length of buyer-supplier trade relationship, leaving room for jusdgement to the investors.
Can you please describe how the integrated insurance works and the benefits it offers?
Our insurer covers up to 90% of the invoice face value, and Incomlend finances maximum 90% as well, which means that the capital invested by the funders into each invoice is 100% covered.
The insurance protects the investors against risk of default from the buyer (situation where the buyer does not pay the invoice at maturity).
At the onboarding stage, each Supplier is required to provide information on its buyers. Each buyer is then screened and financials analysed by Incomlend. Subsequently, should the Buyer satisfy our internal scoring matrix criteria, the Buyer is submitted for Insurance coverage approval to the Credit insurer.
If the Credit insurer accepts to cover the buyer, a maximal funding limit will be set by the Credit Insurer, which Incomlend monitors to prevent crossing the maximum allowed coverage mark. If the Credit Insurer refuses to cover the buyer, the Supplierâ€™s invoices issued to that buyer will not be paid.
If there is a buyer default, the Credit Insurance is activated and funds are reimbursed starting from 60 days after default (maximum possible reimbursement limit is 270 days, depending on the specific situation of the buyer and recovery actions involved).
Is the technical platform self-developed?
The front end of the exchange platform has been developed based on a white label solution, while the back office systems have been customized in house based on a standard solution.
What was the greatest challenge so far in the course of launching Incomlend?
An important challenge was striking the deal with our Credit Insurer, which was reluctant at first to work with a fintech platform, a totally new framework for them.
Can you please describe the market environment and regulation in Singapore?
The market is quite competitive in Singapore in terms of peer to peer lending and invoice trading in particular. Demand for invoice trading is high from the investors, while companies progressively open up to the alternative finance channels
The Monetary Authority of Singapore (MAS) is the financial local regulator. The MAS is strongly backing and promoting the fintech sector in Singapore, the ambition being to become a major international hub for fintechs. The MAS provides a flexible and advantageous environment for fintech, involving as well major financial instutions for the regulatory sandbox.
The MAS has been observing the fintech industry and so far has not regulated the sector as the FCA did in the UK. Howver, the MAS talks directly to different platforms and monitors activity to make sure investors are protected. Some platforms, for instance, have been required by the MAS to obtain a financial advisor licence due to their loan activities.
Under the MAS Securities act, a trade receivable is so far not considered as a security, while trading invoices at a discount is not considered as a loan provision activity, which involves interest accrual.
Incomlend applies international KYC/AML standards to all its clients while creating progressively a reserve capital by deducting a targeted percentage from each trade.
Which marketing channels do you use to attract investors and borrowers?
Introducers, Agents, Chambers of Commerce, Professional Associations, Forums and conferences, Business services networks (insurance, accounting, incorporations), Private business clubs, VC/BA clubs and associations, Private Wealth management networks, PR, SEO, targeted digital campaigns, social networks and other online media.
Is Incomlend open to international investors?
Absolutely, this is natively the Incomlend model.
Where do you see Incomlend in 3 years?
In 3 years, we see Incomlend crossing the 1 billion USD mark of funded invoices on the platform, world leader of invoice trading and supply chain based on the marketplace funding model.
We also see Incomlend in 3 years as a provider of a diversified range of trade finance instruments (including LCs, payables finance, guarantees), as well as a market reference in terms of digital invoice payments and exchange standard protocols.
Beehive has become the first peer to peer lending platform to set up offices in the Dubai International Financial Centre (DIFC) and become officially authorised and regulated by the Dubai Financial Services Authority (DFSA).
The new regulation is a first for the region and could catalyse growth of the fintech industry, says Beehive. Not only will it ensure clear governance for fintech businesses but will also provide added protection and peace of mind for peer to peer retail investors. Its introduction is particularly timely as peer to peer lending, is becoming an increasingly important route for small and medium enterprises (SMEs) to access finance.
Beehive was launched in Dubai in 2014 by serial entrepreneur, Craig Moore, aided by Rick Pudner, former Group CEO of Emirates NBD. Read an earlier interview Craig Moore gave P2P-Banking.com. Craig Moore, now said: â€œWeâ€™re delighted to be regulated by the DFSA. This regulation reinforces Beehive as one of the fintech leaders in the region and we feel this greatly expands the opportunity to further help SMEs and the wider economy.â€ Continue reading →
The University of Cambridge, Monash Business School and Tsinghua University launch the 2016-2017 Asia Pacific Alternative Finance Industry Survey with the support of major industry associations across the region.
From equity-based crowdfunding to peer-to-peer consumer and business lending, invoice trading to reward-based crowdfunding, these alternative financing activities are supplying credit to SMEs, providing venture capital to start-ups, offering more diverse and transparent ways for consumers to invest or borrow money, nurturing creativity, fostering innovation, generating jobs & funding worthwhile social causes across the Asia Pacific region.
Opening on February 15th 2017, this benchmarking survey aims to capture the key trends, developments, size, transaction volume and growth as well as the impact of changing regulations on the alternative finance markets across Asia in 2016 – building on last yearâ€™s inaugural study.
Last yearâ€™s inaugural report â€“ Harnessing Potential â€“ gathered survey data from 503 leading alternative finance platforms operating in 17 Asia-Pacific countries and regions. The study was cited by over 100 mainstream media organisations and has informed policymakers and regulators of industry developments in Asia Pacific countries including Malaysia, Singapore, India, Australia, Hong Kong and Indonesia for example. The report estimated the total Asia-Pacific online alternative finance market to have grown 323% year-on-year to reach 102.81 billion USD in 2015. China is the world’s largest market by transaction volume, registering 101.7 billion in 2015. Outside mainland China, the rest of the APAC region accrued 1.12 billion USD in 2015 with a 313% year-on-year growth rate from the 271.94 million raised in 2014. The authors hope this yearâ€™s study will dive even deeper into the growth and dynamics of the APAC alternative finance market. Continue reading →
Scandinaviaâ€™s equity crowdfunding platform, Fundedbyme, today received recognition as one of six operatorsÂ for Peer-to-Peer crowdfundingÂ by the Malaysian Securities Commission in the Asian region. This announcement positions Fundedbyme as the only European operator in the Asian region. The award was awarded to Fundedbyme Malaysia at the third annual SCxSC Digital Finance hosted by the Securities Commission Malaysia. Malaysian Minister of Finance, Najib Razak and SC chairman Ranjit Ajit Singh handed over the award to Fundedbyme Malaysiaâ€™s COO, Angelld Quah, and CEO Daniel Geottfert.
The Asian region is seeing an explosion in peer-to-peer activity, particularly, and crowdfunding in general,â€ says Daniel Daboczy, CEO and co-founder of Fundedbyme. â€œFundedbyme is strategically positioned as the bridge between Scandinavia and Asia as we early-on saw the trend of cross-border investments – in the first equity crowdfunding campaign from Malaysia, Halal Speed Dating, we saw that 40% of investors came from Europe, which is very exciting for both Asian and European entrepreneurs,â€ Daboczy continues. The latest equity crowdfunding campaign from Malaysia currently on the platform, iTalent, has registered interest to join from investors in 73 different countries.
Photo: Malaysian Minister of Finance, Najib Razak and Second Finance Minister Johari Abdul Ghani handing over the award to Fundedbyme Malaysiaâ€™s COO, Angelld Quah (Source: Fundedbyme)