CROWDFUNDING, an alternative means of funding for startups and SMEs (small and medium enterprises), is slowly but steadily catching on in Singapore. On Tuesday, MoolahSense, a debt crowdfunding or peer-to-peer (P2P) lending platform that allows individuals to lend directly to businesses in exchange for a fixed return, announced that its inaugural funding campaign for edutech firm Smaths Consulting was 207 per cent subscribed.
Smaths, via MoolahSense's platform, achieved its targeted amount of S$100,000 within 20 days, and at the end of the 30-day campaign period, saw some 44 individual investors submit offers totalling S$207,000. Of these, 19 investors had their offers accepted. The interest rate was set at 9.9 per cent per annum, and the excess, non-allocated funds of S$107,000 were returned to the respective investors, who could choose to keep the funds in their MoolahSense accounts or cash them out.
"The large number of investors participating in our first campaign is clear indication of the popularity and potential of a P2P lending system in Singapore," said Lawrence Yong, CEO of MoolahSense, which launched in November and is believed to be the first such platform here.
Mr Yong said investing appetite is strong among individuals in Singapore, who are eager to lend money in small increments (MoolahSense's minimum lending sum is S$1,000) to promising ventures in exchange for fixed returns. And these returns, usually more attractive and superior to those from traditional forms of investments, are what will encourage more investors to come on board, he told BT. Businesses, on top of enjoying diverse financing sources and lower financing costs, can bypass the complex and costly application process for bank loans too.
"Beyond money, it was mostly the 'public relations effect' that motivated Smaths to raise funds through MoolahSense. We've received validation on our business model, forged partnerships with our investors, and seen a boost in our brand image," said Smaths CEO Ian Gan.
An education centre, Smaths also manages the coaching app Solve My Question, which lets students send in pictures of difficult math or science questions and receive solutions in the form of pictures or videos within two hours. "Smaths is unlike most tuition centres because it guarantees results. If the pre-agreed, desired result is not delivered, a 100 per cent of the fees will be returned."
Smaths, which intends to use the S$100,000 for expansion plans in 2015, said its first-round success is likely to drive a second fund-raising campaign on MoolahSense next year. While the platform is currently not regulated by the Monetary Authority of Singapore (MAS), Mr Yong said it has obtained written clearance from the relevant authorities (such as MAS and the Ministry of Law) that its debt crowdfunding activities do not infringe existing regulations. When asked about competition in the local market, Mr Yong cited Funding Straits but said the latter site is still in ideation and not "live" yet.
Meanwhile, these debt crowdfunding developments come as MAS and Singapore Exchange are exploring the use of equity crowdfunding for startups and SMEs. MAS had earlier said that it is closely monitoring developments in other jurisdictions and working with Spring Singapore to develop an appropriate regulatory framework, while SGX has formed a team focused on SMEs.
Equity crowdfunding, not to be confused with debt crowdfunding, allows individuals to lend money to businesses in exchange for shares, and not a fixed return.