KUALA LUMPUR, March 19 — If you scan the business section of any publication these days, you will have come across the term “P2P lending” but what exactly is it? And why is it gaining traction as a funding solution for SMEs in Malaysia?
Peer to Peer (P2P) financing is simply the practice of raising financing through an online platform, explained Yoon Jun Jie, CEO and founder of Capsphere, Malaysia’s first asset based P2P financing and investment platform registered with Securities Commission Malaysia.
“It facilitates the connection between businesses seeking funding with investors, including retail investors, high-net-worth individuals, institutional investors, and government entities, who are seeking to diversify their investment portfolios.”
He adds that the main difference between P2P financing and traditional lending models are the “user on-boarding journey and the speed at which financing is disbursed.”
The Capsphere user journey is entirely digital meaning SMEs can submit an application in five minutes and if approved, they can get the capital within five business days.
When asked about the P2P lending landscape in Malaysia, Jun said it is experiencing rapid growth in the Asia-Pacific region, particularly in Malaysia.
“With the expansion of digital services, P2P financing emerges as a more convenient alternative to conventional banking by establishing direct connections between borrowers and lenders.
“This approach frequently leads to expedited loan disbursement times and more flexible loan terms, rendering it an attractive option for individuals and small businesses.”
As of September 30, 2024, P2P financing has raised a total of RM7.9 billion.
“Since our inception in mid-2020, Capshere has disbursed a total of RM50 million in loans to SMEs across 372 campaigns across Malaysia from Penang, Klang Valley, Johor, Sabah and Sarawak to name a few,” he said.
So how does Capsphere’s platform work?
“As an SME, all you need to do is sign up with your company name and details. Attach a few documents such as your company’s financial statements, bank statements, etc.
“Once we have received your application, our credit team will review and if no additional documents are required, you may start your financing journey with us!”
And as an investor, you can sign up in less than five minutes via the web platform or app. “All you need is to provide your personal information i.e. full name, email address, attach a copy of your IC, verify your email address and deposit a minimum of RM200 and you can get started on your investment journey from as little as RM50 per investment!”
To ensure businesses are vetted, Capsphere uses a proprietary credit assessment tool, specifically for assessing the health, financial and business risk pertaining to issuance of the Investment Note.
“Based on our assessment of the issuer’s financials, management, operations, and collateral, each issuer is categorised into a range of risk classes ranging from A (low credit risk profile) to F (high credit risk profile). These risk profiles are published on the factsheet to ensure transparency to investors of the risk levels of each issuer,” Jun explained.
At the same time, Capsphere also relies on credit bureaus to provide information on the Issuer’s creditworthiness and previous behaviours (e.g. delinquencies).
Jun went on to say that “this has also enabled us to maintain a low default rate of about 1.5 per cent as of end December 2024.”
Jun is proud that Capsphere has contributed to Malaysia’s SME ecosystem and the local economy.
As it began operations during the Covid-19 pandemic, Capsphere supported sectors that were allowed to operate during the movement control: F&B groups, trading, logistics, services and manufacturing.
“One of our success stories is a key client who operates an electronic trading business with an online and offline presence in the Klang Valley. Since Covid-19 we have supported him with more than RM900,000 across 12 successful campaigns to grow and scale.”
Another milestone Capsphere is particularly proud of is “the recent grants we have received from both SC via the Digital Innovation Grant (DIGID) to enhance our credit decisioning engine and also Cradle Fund to develop our mobile app and scale our commercialization initiative.”
Through these grants, Capsphere is able to streamline its SME sign up process and decrease the time it takes to evaluate and onboard new Issuers. “This has ultimately helped us to finance more SMEs in Malaysia.”
But what inspired Jun to launch Capsphere in the first place?
“Coming from a SME family in the automotive sector, I was always intrigued by how SMEs obtain financing to grow, and was made to understand that we relied on friends, family and people within the community for the capital we needed to buy equipment to grow and scale.
“While studying in the UK I was inspired by how crowdfunding platforms was able to support SMEs providing them access to capital by matching them to investors to generate higher returns.
“Observing those situations first hand, I was inspired to establish Capsphere.”
So what’s next for Capsphere?
“We have been Shariah compliant since 2020 and recently expanded our Shariah financing solutions to include invoice and contract financing.
“This is timely as Capsphere has been included In the Government SARANA initiative where SMEs with federal government contracts can seek financing from the platform to improve their cash flow pending payment from the government.
“This initiative will also help our investors as the repayments will be directly from the government. In addition to that, Capsphere is also expanding our investor network and has recently onboarded a few institutional investors which will help improve our financing size and speed.”
In the next five years, Jun thinks the P2P financing and investment industry will contribute at least 5 per cent of the financing requirements in Malaysia, enabling more SMEs to grow and create more jobs while allowing investors to generate good returns.
