PETALING JAYA: Micro, small and medium enterprises (MSMEs) make up about 98.5% of businesses in Malaysia, making them the backbone of the country’s economy.

       They contribute nearly 40% of the country’s gross domestic product (GDP) and almost half the country’s workforce.

       To thrive, these businesses require funding, especially start-ups or those that are struggling to survive the initial lean years before breaking even.

       However, when it comes to financing, these companies would usually run into problems securing loans from traditional financial institutions, as banks normally do not cater to this underserved segment.

       Calvin Foo, the chief executive officer of alternative financial platform Fundaztic, pointed out that businesses in this segment can get the financing they need, through peer-to-peer (P2P) financing.

       In his presentation on “The advancement of fintech through P2P financing” during the “Digital Financing: Powering a Ca$hless Economy” virtual conference, Foo said the form of financing has existed since 2017 when Malaysia became the first Asean country to set up a full P2P regulatory framework.

       Currently, there are 11 licensed P2P operators like Fundaztic registered with the Securities Commission, offering MSMEs an alternative access to funds, while providing new investment opportunities to Malaysians.

       As of March this year, the P2P industry had disbursed RM1.4bil to over 3, 000 businesses in the country.

       “Instead of banks, businesses now can receive financing from the rakyat, through P2P, ” explained Foo.

       Each P2P platform is made up of investors; businesses; termed issuers; and the platform itself. Issuers in need of funding only have to register with the platform online and apply for financing.

       Once these applications are approved, the platform will host the issuers’ business investment notes online for investors to view and consider investing.

       “If a business needs RM100, 000 multiple investors could crowdfund the sum, with individual investments starting as low as RM50, to help the business achieve its target, ” said Foo.

       Once the amount is reached, the platform disburses these funds directly to the issuer’s business account.

       The issuer will then repay in installments at pre-agreed tender and interest rates.

       The P2P funding application process is convenient and is done wholly online, highly accessible, with access to flexible interest rates and tender.

       Fundaztic usually releases funds to businesses as fast as five days.

       Other benefits include low origination fees starting from 1%, no legal and documentation fees, no early settlement penalty, collateral free and no hidden charges.

       It offers flexible terms from six to 36 months for low financing amounts from RM20, 000 to RM200, 000.

       Investors are assured of receiving their first month principal and interest immediately upon fund disbursement, without losing their full capital.

       They will receive effective interest rates of up to 23% per year and monthly repayments deposited into their Fundaztic accounts.

       They need not pay upfront, but only when they want to invest, and can draw out their account balance at any time.

       To be eligible for P2P funding, a business has to be a sole proprietor, a partnership or an unlisted private limited company registered with the Companies Commission of Malaysia.

       It can only apply for funding on one platform at a time, if financing is for a similar purpose.

       As Fundaztic is fully digital, registering as members is easy through a mobile app to upload the MyKad to be authenticated.

       Facial recognition is also required during the verification process.

       No physical documents are required and individuals can complete their applications within 10 minutes, while businesses would probably take a day or two.

       Fundaztic’s security features go beyond standard email authentication.

       For one, all monies from investors and repayments from the MSMEs are paid directly via FPX into Maybank Trustees Bhd, a secured trustee account.

       The system undergoes periodic penetration tests and it uses e-KYC for its investors.

       Fundaztic also has its own capital guarantee programme, called Principal Protect, whereby it guarantees the investors capital when the investment criteria is met.

       In a separate discussion entitled “FinTech, InsurTech and RegTech: Boosting Resilience and Operational Excellence for Financial Services”, Foo said there were no technologies currently that could be used by the traditional institutions to predict financing an applicant as their yardstick depended on the business’s historical credit data.

       He added that Fundaztic used alternative data to gauge credit rating when offering financing to SMEs with a zero credit history, such as transactional data from partners like Lazada to benchmark and predict sellers on their turnovers and future sales.

       Fundaztic turns four in July and to celebrate its anniversary, it will be doing giveaways throughout the month with prizes such as the Sony PS5 and an Apple iMac.

       Check out its website at www.fundaztic.com or follow its social media pages to find out more about Fundaztic’s 4th Anniversary Giveaways.

       Fundaztic is a Terabyte partner in the “Digital Financing: Powering a Ca$hless Economy” Live Virtual Conference which was held on June 22 and 23 in commemoration of Star Media Group Bhd’s 50th Anniversary.

       Visit bit.ly/digifinplaylist to watch the sessions’ replay.