Funding Societies gets regulatory nod for retail p2p lending
Singapore
FUNDING Societies has clinched in-principle approval to offer peer-to-peer (p2p) lending to retail investors in Singapore, and expects to offer again its p2p loans to these non-accredited investors by the first quarter of 2017.
It said on Monday that it will soon hold a capital market services licence in Singapore after it meets certain criteria set by the Monetary Authority of Singapore (MAS). These include a mandatory security deposit, and proof of financial resources to meet the base capital requirement, Funding Societies' co-founder Kelvin Teo told The Business Times.
Funding Societies begun its operations in 2015 by offering p2p loans to retail investors, but had to stop temporarily after the MAS in June clarified its rules for crowdfunding platforms such that these players would have to seek a licence to offer such loans.
Funding Societies and other p2p platforms earn a fee by helping to matchmake small companies seeking short-term loans with investors.
These loans usually offer very high interest rates - commonly at more than 10 per cent per annum - reflecting the high risk and unsecured nature of the loan.
While waiting for approval, retail platforms, including Funding Societies, have continued to offer investing outlets to accredited investors through invoice financing, which they say does not technically require a licence.
Invoice financing is understood to be a sales and purchase agreement, meaning it does not fall under the Securities and Futures Act which regulates crowdfunding platforms among other things. With its upcoming licence, Funding Societies can then deal in securities for lending-based crowdfunding, and offer it to all classes of investors in Singapore.
Funding Societies is also expanding again. It has separately clinched a licence from Malaysia's Securities Commission to provide peer-to-peer financing services. It was one out of six that received the licence, drawn from over 50 applications.
Like in Singapore, Funding Societies Malaysia will offer term loans, invoice financing and micro loans, said Mr Teo. It aims to start its operations in Malaysia in the first half of next year, through its incorporated unit Modalku Ventures. This comes soon after Funding Societies expanded into Indonesia this year.
There has been rising demand for p2p loans, as banks have retreated from lending in recent months, said Mr Teo.
"However, the key is not demand, but quality demand. Consistent with our approach of quality growth, we've maintained pace to protect investors' interest," he said.
"We are in it for the long game. With the uncertain economic environment, Funding Societies is tightening lending standards to control defaults. Nevertheless, we do expect a corresponding increase in default rates, as we see in banks."
Mr Teo told BT in August that he expects to keep default rates below 3 per cent, and at worst, 5 per cent, this year. He did not comment directly if the platform would breach the 3-per-cent target set for the year.
This comes as a car parallel importer looks unlikely to pay off thousands in p2p loans, The Business Times reported this month.
The sole director of the company is now uncontactable, and the company - TLC Cars - has failed to deliver on sold vehicles. TLC Cars still owes about S$30,000 to investors who invested through Funding Societies. It had further borrowed S$500,000 from another major, but unnamed, crowdfunding platform. A separate S$100,000 is also due to investors on a third platform, Capital Match. Police reports have been lodged against the company, and the police are probing the case.
