The Ultimate Guide To P2P Lending PDF

- A
PUBLICATION OF WORLD BIZWEEK -

TABLE OF CONTENTS
THE ULTIMATE GUIDE TO
Investing in P2P
Lending
A STEP-BY-STEP GUIDE FOR BEGINNERS TO INVEST IN P2P LENDING
COPYRIGHT
© 2019 World BizWeek. All rights reserved. This eBook was electronically
published in Malaysia.
DISCLAIMER
This eBook is intended to provide an in-depth analysis on P2P lending as an
investment instrument for educational purposes only. This eBook does not
constitute a financial, investment or any form of advice.
All opinions expressed are based on research and experience and solely for
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TABLE OF CONTENTS
Page(s)
Introduction 1-2
Chapter 1: The Mechanism of P2P Lending

1 in Malaysia 3 - 12
Chapter 2: Understand the Risks of

2
Investing in P2P Lending 13 - 17
Chapter 3: Strategies to Minimise Your Risk

3 While Maximising Returns 18 - 31
Chapter 4: A Comparison of All P2P Lending

4 Platforms in Malaysia 32 - 59
Chapter 5: A Step-by-Step Guide to

5 60 - 66
Investing in P2P Lending
Chapter 6: A 3-Step System to Grow Your

6 Wealth Through P2P Lending 67 - 87
Final Thoughts 88 - 89
INTRODUCTION
Introduction
“What if I don’t get back my money?” “What if P2P lending is a Ponzi scheme?”
These are the real concerns that discourage most investors, if not all, from
investing in P2P lending.
Trust me, I was once like you.
I was very skeptical about such investment when I first heard about it two years
ago. An investment that doesn’t require any specialised financial knowledge yet
could simply generate more than 10% return per annum. Not to also mention the
minimum initial investment is as low as only RM100.
RM100 to get started? More than 10% per annum? It’s no brainer isn’t it? But I
hesitated. I did not jump in right away despite the mouth-watering returns.
In fact, I’ve spent more than a year to study, research and observe the P2P lending
market and activities before I started investing.
As an investor, I need to make sure that I understand everything about an

investment before I start investing. I want to be well-informed about how it really
works, the relevant legislation, underlying risks and tax implications before
making my first move.
And I’m pretty sure that’s what you’re doing right now as a rational investor. The
good news is I’m here to help. In this handbook, I’ve included everything about
P2P lending that you need to know before getting started.
1
Introduction
Other than the basic information, I’ve also included the strategies to minimise
your risk while maximising your returns. More importantly, I’m also going to share
with you a step-by-step guide to get started with investing in P2P lending.
You can save much of your time and effort searching through everywhere to
gather the information that you’re not even sure if it’s relevant. Make good use of
this guide and use your own judgment to decide whether P2P lending is a good
investment choice or not.
The only thing that I can assure you is that P2P lending is certainly a game changer
for the investment landscape of Malaysia.
Let’s get started!
P.S. I’ve spent hundreds of hours to create this content and it’s absolutely FREE for
everyone. Because I see it as an obligation to share when I find something that
can really benefit you and everyone else. If you think this guide is useful, please
do share with your friends and family. Sharing is caring. Spread the love! Thank
you!
Follow us:
2
CHAPTER ONE
The Mechanism of P2P

Lending in Malaysia
What is Peer-to-Peer Lending?
Peer-to-peer lending, also known as P2P lending. It essentially refers to the
borrowers getting loans from the lenders through an online marketplace that
matches between the two parties.
Borrowers are typically individuals seeking for personal loans or companies

sourcing funds for business purposes. Lenders are generally investors who seek to
earn passive income in the form of interest from the loans lent out.
The P2P lending platform facilitates the loan transactions by connecting the
borrowers directly to the lenders. It earns money by charging origination and
servicing fees.
The key distinction between the traditional banking and P2P lending processes is
illustrated below:
Traditional banking process
3
Peer-to-Peer Lending Process
The debt offerings through P2P lending may differ in terms of the loan tenure, size
and interest rate. But all P2P lending platforms, in essence, operate based on the
same principle. It doesn’t involve a financial intermediary such as a bank or
financial institution in contrast to the traditional borrowing and lending activities.
The very first P2P lending platform started in U.K. in 2005. It has since gained
popularity over the past decade with a significant increase in market size
globally. According to Allied Market Research, P2P lending market is expected to
reach $460 billion by 2022 at a CAGR growth rate of 51.5% from 2016 to 2022.
4
Pros and Cons of Peer-to-Peer Lending
There’re obvious reasons why P2P lending is so attractive to both the borrowers
and lenders. Such business model provides a win-win formula to both parties that
fit their interests perfectly. The borrowers get the opportunity to obtain
alternative financing while lenders can get high returns without the need of
specialised financial knowledge.
However, this model also underlies some downsides that both parties may fail to
observe. Let’s look into some of the pros and cons of P2P lending from both
borrower’s and lender’s perspective.
Borrowers
OR
Lenders
5
Borrowers – Pros:
a) Simpler and speedy process

P2P lending eliminates the needs of stringent and cumbersome processes
practiced by traditional banks or financial institutions’. Therefore,
borrowers can raise funds conveniently with ease.
b) Lower eligibility criteria

It generally also has lower credit requirements as compared to the banks in
particular to borrowers who do not possess good credit scores.
c) Lower interest rates

Besides, borrowers have the opportunities to bargain for competitive
interest rate when the lenders bid for the loans.
d) Loans are unsecured

Not to also mention that collateral is not required for the borrowers to get
loans through P2P lending.
e) No prepayment penalty
Lastly, the borrowers are not subject to significant penalty if they decide to
pay off the loan before its due date.
6
Borrowers – Cons:
a) Loan amounts may not be available

Large amounts are usually not available as the loans are typically supplied
by groups of retail lenders.
b) High interest rates

Borrowers with low credit scores that unable to get loans from the banks
are normally charged with high interest rates.
c) Privacy exposure
Most of the P2P lending platforms require public disclosure of the
borrowers’ financial history and information before lenders choose to bid
the loans.
7
Lenders – Pros:
a) Low investment capital

The initial investment capital for the lenders to participate is very low.
b) Higher return on investment

Lenders also enjoy much higher returns with more than 10% yield p.a. as
compared to placing deposits with the banks.
c) Diversification of risk
Besides, lenders can diversify their loan portfolios to lower their risk of
investment.
d) Alternative investment
P2P lending appears to be a good investment alternative for investors to
earn a steady stream of passive income. Besides, investors don’t need any
specialised industry knowledge.
e) Discretion over investment

The lenders also have full control over their loan portfolios. They have the
flexibility to reinvest or withdraw their returned capital anytime.
8
Lenders – Cons:
a) Risk of default
The lenders are exposed to the risk of default by the borrowers and the
loans are generally uninsured. Therefore, there’s a risk of losing their capital
in the event of default. However, that doesn’t mean that investing in P2P
lending is totally unsafe. In chapters later, we will cover what are the right
strategies to minimise your risk of investing in P2P lending.
b) Lack of regulations
There’s lacking in regulations and framework to govern the P2P lending
activities in some territories as the industry is still at infancy stage. The
good news is P2P lending is highly regulated in Malaysia. In fact, Malaysia is
the first ASEAN country to regulate P2P lending.
c) Risk of insolvency
There’s a risk of P2P lending operators going out of business causing the
lenders to lose their capital. In contrast to the banks under financial
distress, bailouts are undertaken by the central bank or government to
protect the interest of the depositors.
Although such cases did happen in other countries, our interests as P2P
lending investors are pretty much protected by Securities Commission
Malaysia (“SC”) who regulates P2P lending. We will cover this part in detail
in the chapters later.
9
Overview of P2P Lending in Malaysia
P2P lending has emerged in Malaysia after SC Malaysia introduced a regulatory
framework in 2016. The framework governs the registration and obligations of a
P2P lending operator.
Malaysia became the first country in ASEAN to regulate P2P lending. The primary
objective is to provide an alternative to the Small and Medium-Sized Enterprises
(SME) to obtain financing to spur economic growth. It’s also meant to provide an
alternative investment option for retail investors.
Obligations of P2P Lending Operators in Malaysia
Based on SC requirements, a P2P lending operator must be incorporated under

Companies Act 1965 with a minimum paid-up capital of RM5 million. Among
other criteria, the directors of an operator must demonstrate that they are fit and
proper to operate such business. Besides, the operator must also ensure that a
transparent and effective risk scoring system is put in place.
The obligations of an operator include determining the suitability of the issuers

and ensure compliance of its platform rules. This involves background checks,
credit assessment, disclose relevant information to investors, etc. The operator
must also place the amounts deposited by both investors and issuers in a 3rd
party trustee account before making any disbursement.
10
Borrowers
SC doesn’t impose a limit on the financing amount that a borrower can raise
through a P2P lending platform. The issuer can also raise funds concurrently at
different P2P lending platforms for different purposes.
Investors
SC encourages retail investors to limit their investment to a maximum of
RM50,000 at any one time to reduce their risk exposure. The operator
must disclose all fees and charges to the investors in connection with the
investment.
Besides, investors are eligible to get any relevant information relating to the
investment such as the purpose of funding, business plan, historical financial
information, etc.
11
P2P Lending Operators in Malaysia
There are currently six licensed P2P lending operators in Malaysia as shown
below.
No. P2P Lending Platform(s) Operated by

1. Funding Societies Malaysia Modalku Ventures Sdn Bhd.
2. Fundaztic Peoplelender Sdn Bhd
3. QuicKash QuicKash Malaysia Sdn Bhd
4. Alixco FBM Crowdtech Sdn Bhd
5. Nusa Kapital Ethis Kapital Sdn Bhd
6. B2B FinPal B2B Finpal Sdn Bhd
I’ve included a comprehensive review of these P2P lending platforms in this

handbook. I will share with you a comparison of all platforms in Chapter 4. You
can choose whichever platform that suits you best based on the available
information.
12
CHAPTER TWO
Understand the Risks of

Risks of Investing in P2P Lending
1. Risk of Default by Borrowers
The most apparent risk of investing in P2P lending is the risk of default by the
borrowers. Default occurs when the borrowers fail to make scheduled repayments
on time to the lenders (investors).
P2P lending operators generally disclose to investors the measures that have been
put in place to minimise the risk of default. Other than having a rigorous and
transparent credit assessment process as required by SC, such measures
include obtaining personal guarantees from the Directors of the borrowers.
Besides, P2P lending operators may outsource to debt collection agencies to

expedite the repayment process in the event of late payments. In the last resort,
they would initiate legal proceedings to recover the bad debts.
But there’s still a possibility of investors losing their capital invested in a particular
investment note if the borrower defaults. The reality is that the risk of default will
never be eliminated.
To put this into perspective, traditional banks with years in operations have not
ever maintained a zero default rate despite having stringent controls over their
credit risk assessment processes.
The good news is there are certain ways to minimise the risk of default effectively.
With proper investing strategies, the returns that you earn could still be much
higher than the losses in the event of any default. We will cover this in detail in
the next chapter.
13
2. Loans Are Not Secured/Collateralised
P2P lending platforms offer loans that are not secured or collateralised. In
contrast to traditional banks, some borrowers pledge their assets as collateral to
obtain financing. In the event of default, the banks will take possession of the
assets to recover part or all of the bad debts. Collateral helps to mitigate the risk
of default thus provides a layer of protection to the lenders.
Therefore, the risk of default on P2P lending loans is higher than the traditional
bank loans. P2P lending operators do not guarantee any form of return to the
investors. In other words, you as the lender or investor could end up walking away
empty-handed in a worst-case scenario.
3. Business Risk of P2P Lending Operators
The number of P2P lending platforms that have gone bust and collapsed in
China is on the rise. The turmoil sparks fear among the investors and many have
rushed to pull their money out from the platforms.
Many P2P lending platforms have come under scrutiny in China as regulators have
stepped up measures to crack down on illicit use of funds and Ponzi schemes
involved in P2P lending. The increasing number of fraud cases in P2P lending has
shaken the investors’ confidence.
The most well-known being Ezubao, once China’s biggest P2P lending platform
uncovered being a $9 billion Ponzi scam involving more than 900,000 investors.
14
3. Business Risk of P2P Lending Operators (continued)
How About P2P Lending Operators in Malaysia?
Now you may wonder what if the P2P lending platform that you have invested go
out of business one day when you wake up in the morning. “Will all my money go
down the drain?”.
Fortunately, such risk is less prevalent in the context of Malaysia P2P

lending market. To put things into perspective, China has at least 50 million
registered investors and close to $200 billion of outstanding loans. Thousands of
P2P lending operators in China are largely unregulated.
As compared to Malaysia P2P lending market, there’re only six licensed operators
with RM118 million raised as at June 2018.
The good news is that P2P lending operators in Malaysia are subject to strict
guidelines and SC regulatory framework. At the time of writing, SC had only issued
six licenses to P2P lending operators in Malaysia.
You may have doubt or fear that similar instance may happen to your investment
in P2P lending. But it should be less of a concern. Under the SC requirements, a
P2P operator must place all the monies received in a third party trust account
(e.g. banks as trustees) before making any disbursement. The operator is
prohibited to place the monies into its own bank accounts.
Besides, a P2P lending operator cannot cease its business without prior
engagement with the SC.
15
4. Liquidity and Prepayment Risks
There are other risks that are less pervasive. But those may still be relevant for
you to consider before investing in P2P lending.
Investing in P2P lending creates a liquidity risk for investors. You cannot withdraw
your money any time at your convenience once you’ve committed into a
particular investment note. You will only receive the principal and interest based
on the maturity of each repayment. Savvy investors with a proper investment
plan may not bother as they would typically set aside funds for emergency
purposes.
Investing in P2P lending is also exposed to prepayment risk. Prepayment risk

refers to a situation when the borrowers repay the outstanding loans before they
fall due. Such instance may not be common. But it’s still a possible scenario given
that all P2P lending platforms in Malaysia do not impose a significant penalty if
borrowers choose to repay the loans earlier.
The drawback for the investors is the loss of interest associated with the future
repayments. However, it should be less of a concern as it’s effortless for the
investors to re-invest in other investment notes with similar interest rates.
16
Doesn’t it sound a bit risky to invest in P2P lending? Don’t let it damper your
confidence and stop you from giving it a shot. You’ll definitely miss a great
investment opportunity.
The brutal truth is that there’s no risk-free investment in reality.
In the next chapter, I’ll share with you the effective strategies to minimise
your risk of investing in P2P lending while maximising your returns.
“ In investing, what is
comfortable is rarely profitable.
“
- Robert Arnott
17
CHAPTER THREE
Strategies to Minimise Risk

While Maximising Your
Returns
Maximise Your Returns at the
Lowest Risk
Remember the first time when I spoke to my auditor colleagues about P2P
lending. The auditors’ professional skepticism starts kicking in when they heard
about it and everyone threw me the same questions.
Is P2P lending legal in Malaysia?
As mentioned earlier, Malaysia became the first country in ASEAN to regulate P2P
lending after SC introduced a regulatory framework in 2016. To date, there are
only six licensed P2P lending operators in Malaysia.
Is it safe to invest in P2P Lending?
Certainly, there’s always risk associated with any investment. But I will never say
it’s unsafe to invest in P2P lending. You’ll get what I mean as you read on.
18
Lowest Risk
“
“ Don’t put all eggs in one
basket.
19
Lowest Risk
Diversification
It’s indeed a common investment philosophy that everyone understands. Perhaps,

even elementary school kids would be able to explain in layman’s terms.
Investors always use diversification to reduce concentration risk in their

investment portfolios. It helps avoid the risk of losing all money in a particular
investment when the investment fails. Many P2P lending investors think that they
have diversified their loans portfolio perfectly by spreading their investments
across different borrowers.
But they fail to understand that diversification is far more than just investing in
different investment notes.
“ Investors have been so oversold on

diversification that fear of having too many
eggs in one basket has caused them to put far
too little into companies they thoroughly know
and far too much in others which they know
“
nothing about.
– Philip Fisher
20
Lowest Risk
#1 – Diversify by investing in investment notes with low
correlation
No doubt the simplest way of diversifying in P2P lending is to spread your
investment across different borrowers. But investors should also diversify by
always investing in borrowers that operate in different industries with low
correlation.
It simply means that if you’re investing in two borrowers with similar

creditworthiness, the two borrowers shall be operating in different industries.
Why is it a big deal?
When there’s any catastrophe or political changes that might adversely affect a
specific industry, your risk of investment would be much lower.
Imagine you’ve now invested in two investment notes where both borrowers are
construction companies. Your risk exposure becomes much higher when the
Government suddenly announced the cancellation of mega infrastructure projects
which may have a direct link to both of your borrowers.
On the contrary, the risk would be minimised if one of the borrowers operates in
the entertainment industry instead. The more uncorrelated your borrowers are,
the lower the risk by using diversification.
Just giving you another perspective, diversification may not be effective if two
borrowers operate in the airline and logistic industries respectively if there’s a
sudden spike in oil price.
21
Lowest Risk
#2 – Diversify by allocating the optimal amount to invest
“How many tranches should I split my investment into?” “How much should I
invest in each investment note?” These are the questions that you should ask
yourself before investing in P2P lending.
The effectiveness of a diversification strategy also depends very much on the

allocation of your money available for investment. It applies only simple
mathematics. Imagine now you have RM10,000 to invest in P2P lending.
Let’s break it down into 100 tranches with each tranche worth RM100. Each
tranche represents 1% of your total investment (100/10,000).
22
Lowest Risk
Scenario 1:
Initial investment: RM10,000 (A)

Total repayment: RM11,088 (B)
Interest rate per annum: 12%
Default rate: 1%
Total gross return: 10.9% (B/A-1)
No. Investment 12% Interest No. Investment 12% Interest

(RM) (RM) (RM) (RM)
1 100 12 51 100 12
2 100 12 52 100 12
3 100 12 53 100 12
4 100 12 54 100 12
5 100 12 55 100 12
6 100 12 56 100 12
7 100 12 57 100 12
8 100 12 58 100 12
9 100 12 59 100 12
10 100 12 60 100 12
11 100 12 61 100 12
12 100 12 62 100 12
13 100 12 63 100 12
14 100 12 64 100 12
15 100 12 65 100 12
16 100 12 66 100 12
17 100 12 67 100 12
18 100 12 68 100 12
19 100 12 69 100 12
20 100 12 70 100 12
21 100 12 71 100 12
22 100 12 72 100 12
23 100 12 73 100 12
24 100 12 74 100 12
25 100 12 75 100 12
23
Lowest Risk
Scenario 1: (continued)

(RM) (RM) (RM) (RM)
26 100 12 76 100 12
27 100 12 77 100 12
28 100 12 78 100 12
29 100 12 79 100 12
30 100 12 80 100 12
31 100 12 81 100 12
32 100 12 82 100 12
33 100 12 83 100 12
34 100 12 84 100 12
35 100 12 85 100 12
36 100 12 86 100 12
37 100 12 87 100 12
38 100 12 88 100 12
39 100 12 89 100 12
40 100 12 90 100 12
41 100 12 91 100 12
42 100 12 92 100 12
43 100 12 93 100 12
44 100 12 94 100 12
45 100 12 95 100 12
46 100 12 96 100 12
47 100 12 97 100 12
48 100 12 98 100 12
49 100 12 99 100 12
50 100 12 100 Default
Subtotal 5,000 600 Subtotal 4,900 588
Total 11,088
You may refer to the calculation in the Excel worksheet: Scenario 1
24
Lowest Risk
As shown above, you’ll get a gross return of 10.9% assuming there’s one default
on the loans that you’ve invested throughout the year. Well, you may feel that the
1% default rate seems to be too optimistic.
But if we use Funding Societies as the benchmark, it has a default rate of less than
1% at the time of writing. Funding Societies is a good proxy as it’s the largest P2P
lending platform that offers the highest investment opportunity in Malaysia.
Of course, historical data doesn’t guarantee the exact outcome of the future.
Default rates may be adversely affected by various factors such as economic
recessions, political changes, slowing economic growth due to the effect of US-
China trade war, etc.
As an investor, it’s definitely great to be conservative. For whatever reason,

assume there’s possibly five times increase in the risk of default in future. Let’s
look at the results of a different scenario with a 5% default rate below.
25
Lowest Risk
Scenario 2:
Initial investment: RM10,000 (A)

Total repayment: RM10,640 (B)
Interest rate per annum: 12%
Default rate: 5%
Total gross return: 6.4% (B/A-1)
(RM) (RM) (RM) (RM)
1 100 12 51 100 12
2 100 12 52 100 12
3 100 12 53 100 12
4 100 12 54 100 12
5 100 12 55 100 12
6 100 12 56 100 12
7 100 12 57 100 12
8 100 12 58 100 12
9 100 12 59 100 12
10 100 12 60 100 12
11 100 12 61 100 12
12 100 12 62 100 12
13 100 12 63 100 12
14 100 12 64 100 12
15 100 12 65 100 12
16 100 12 66 100 12
17 100 12 67 100 12
18 100 12 68 100 12
19 100 12 69 100 12
20 100 12 70 100 12
21 100 12 71 100 12
22 100 12 72 100 12
23 100 12 73 100 12
24 100 12 74 100 12
25 100 12 75 100 12
26
Lowest Risk
Scenario 2: (continued)

(RM) (RM) (RM) (RM)
26 100 12 76 100 12
27 100 12 77 100 12
28 100 12 78 100 12
29 100 12 79 100 12
30 100 12 80 100 12
31 100 12 81 100 12
32 100 12 82 100 12
33 100 12 83 100 12
34 100 12 84 100 12
35 100 12 85 100 12
36 100 12 86 100 12
37 100 12 87 100 12
38 100 12 88 100 12
39 100 12 89 100 12
40 100 12 90 100 12
41 100 12 91 100 12
42 100 12 92 100 12
43 100 12 93 100 12
44 100 12 94 100 12
45 100 12 95 100 12
46 100 12 96 Default
47 100 12 97 Default
48 100 12 98 Default
49 100 12 99 Default
50 100 12 100 Default
Subtotal 5,000 600 Subtotal 4,500 540
Total 10,640
You may refer to the calculation in the Excel worksheet: Scenario 2
27
Lowest Risk
Based on the 2nd scenario, an investment portfolio of 5% default rate could still
magically generate a positive return of 6.4%!
The net return after service fee would certainly still be much higher taking into
account the effective interest if you reinvest the amounts received throughout the
year.
What does that mean? It means it’s perfectly fine even if there’s a default!
There are expectations that some loans may not be recoverable on day 1. And it’s
totally okay if you’ve fully diversified your portfolio with the right allocation of
amount. It still provides a higher return than the traditional investments like fixed
deposits. In simple terms, you don’t have to worry that some borrowers might not
repay the loans.
The rule of thumb is that each loan that you invest should represent
approximately the historical default rate of the P2P lending platform. It’s effortless
for you to re-adjust your loan portfolios with the appropriate allocation from time
to time.
The default rate is unlikely to swing to different extreme ends since the P2P
lending platforms apply their credit risk assessments consistently. The borrowers’
credit profiles are also unlikely to differ drastically over time.
28
Lowest Risk
#3 – Diversify your investment in different P2P lending
platforms
Next, you should also diversify by investing in different P2P lending platforms.
Although the obligations of P2P lending operators and the platform rules
are broadly similar, the credit assessment methodologies are different.
For example, Funding Societies provides an opinion-based assessment and

qualitative disclosures to the investors. On the contrary, most of the P2P lending
platforms assign a risk grading to each investment note based on their respective
credit assessment.
Each P2P lending platform may have a different level of risk tolerance. For
instance, QuicKash offers investment notes that come with a principal guaranteed
element but a lower interest rate as compared to other P2P lending platforms. It
charges the borrowers a guarantee fee for 3rd party guarantee services. Some
investors may favour such offering as it reduces the risk of default by the
borrowers.
Therefore, it’s important to understand the characteristics of each P2P lending

platform before you diversify your investment. In the next chapter, I’ll share with
you a comparison of all P2P lending platforms in Malaysia. And the reasons why I
choose Funding Societies and QuicKash to diversify my portfolio.
29
Lowest Risk
Do Your Own Due Diligence
Based on SC requirements, each P2P lending platform is obliged to verify the
relevant information or documents submitted by the borrowers. This information
is made available to all investors through the platform.
More often than not, investors will rely on the P2P lending operators’ credit
assessment of each borrower. But each investor may have different risk appetite.
Therefore you should always perform your own due diligence before you invest.
There are certain metrics that can help you decide on which investment note to
invest.
• Loan tenure – A loan with a longer tenure poses higher uncertainty as

compared to a shorter one.
• Historical financial information – Some of the P2P lending platforms

disclose the audited financial information of the borrowers. A business that
is consistently making losses based on historical trend has a higher risk of
default.
• Age of the borrower – A new business has a higher risk of default as

compared to long-established businesses.
30
Lowest Risk
Do Your Own Due Diligence
• The industry of the borrower – Certain industries tend to be riskier than

others at different times. For example, the construction industry has a
negative outlook following the Government’s move to reduce the
infrastructure spending. Similarly, the plantation industry may pose a higher
risk due to low palm oil price as a result of global oversupply.
• Repayment history – Some borrowers are recurring customers of the P2P

lending platforms. The repayment history of the borrowers indicates the
borrowers’ creditworthiness as well.
Author’s thoughts
“ Again, there’s no risk-free investment in this world. A

rational investor doesn’t aim to eliminate the risk of
an investment portfolio. But rather, to manage it
based on his/her available capital to achieve
“
maximum returns at a comfortable level of risk.
31
CHAPTER FOUR
A Comparison of All P2P

Lending Platforms in Malaysia
A Comparison of All P2P Lending
Platforms in Malaysia
A general question that every investor would definitely ask before investing in P2P
lending. “Which is the best P2P lending platform in Malaysia?”. After giving you
the low-down on how does P2P lending work, let’s look at all P2P lending
platforms available in Malaysia.
I can’t stress enough the importance of choosing the right platform to invest. Not
only your choice will affect your returns significantly, your risk of investment will
also be different. (I’ll explain in detail later.)
P2P Lending Operators in Malaysia
As a quick recap, there are currently six licensed P2P lending platform operators in
Malaysia as shown below.
No. P2P Lending Platform(s) Operated by

1. Funding Societies Malaysia Modalku Ventures Sdn Bhd.
2. Fundaztic Peoplelender Sdn Bhd
3. QuicKash QuicKash Malaysia Sdn Bhd
4. Alixco FBM Crowdtech Sdn Bhd
5. Nusa Kapital Ethis Kapital Sdn Bhd
6. B2B FinPal B2B Finpal Sdn Bhd
32
Overview of P2P Lending Platforms in Malaysia
1. Funding Societies Malaysia – Modalku Ventures Sdn Bhd
Funding Societies is a Southeast Asia leading P2P lending platform headquartered

in Singapore. Kelvin Teo and Reynold Wijaya founded Funding Societies in 2015
while they were studying at Harvard Business School. It serves primarily the SME
markets in Singapore, Indonesia and Malaysia. It made its debut in Malaysia in
February 2017.
Funding Societies is the first and largest P2P lending platform in Malaysia at the
time of writing. It’s also the only P2P lending company featured in the Emerging
50 Rising Stars in the Top Fintech 100 list for 2018. The list is the compilation of
the best FinTech innovators from around the world.
33
1. Funding Societies Malaysia – Modalku Ventures Sdn Bhd

(continued)
Funding Societies had successfully disbursed approximately RM974 million worth

of loans across the region at the time of writing. It maintains a low default rate of
below 1.5% regionally since launch.
34
2. Fundaztic – Peoplelender Sdn Bhd
A group of prominent ex-bankers and a lawyer founded Fundaztic. It commenced

its operations in July 2017. Jeffrey Chew is the founder and Chairman of the
company.
Interestingly, he is also currently the Group CEO of Paramount Corporation Bhd, a

company listed on the Main Market of Bursa Malaysia. Kristine Ng is the
incumbent CEO of Fundaztic. She has years of experience in Credit Guarantee
Corporation before taking up her role in Fundaztic.
As of June 2018, Fundaztic had successfully disbursed closed to RM15

million loans to SMEs.
35
3. Quickash – QuicKash Malaysia Sdn Bhd
QuicKash is operated by QuicKash Malaysia Sdn Bhd. It’s a wholly-owned

subsidiary of ManagePay Systems Berhad (ManagePay). ManagePay is listed on
the ACE Market of Bursa Malaysia. It’s a provider of end-to-end electronic
payment solutions for banks and financial institutions, merchants and card issuers
in Malaysia.
QuicKash offers most of the investment notes that come with a principal
guaranteed element. It charges the borrowers a guarantee fee for 3rd party
guarantee services. Therefore, it minimises the risk of default by the borrowers
and provides the investors with an additional layer of protection. At the time of
writing, QuicKash had successfully disbursed loans amounting to RM16.8 million
since launch in September 2017.
36
4. Alixco – FBM Crowdtech Sdn Bhd
Alixco is operated by FundedByMe Malaysia (FBM Crowtech Sdn Bhd).

FundedByMe also operates equity crowdfunding platform as approved by SC
Malaysia. It’s a Swedish-based company. It also runs a crowdfunding platform in
Europe with more than 86,000 investors across 196 countries.
Alixco had successfully raised more than EUR 37 million for 472 companies
according to its official website.
37
5. Nusa Kapital – Ethis Kapital Sdn Bhd
Nusa Kapital is operated by Ethis Kapital Sdn Bhd. It is the world’s first regulated
Shariah-compliant P2P lending platform. It was founded by Umar Munshi, the CEO
of the company. He’s also the chairman of the Islamic Fintech Alliance.
Besides, the team comprises experienced elites such as former senior World Bank
and Barclays Bank executives.
38
6. B2B FinPal – B2B Finpal Sdn Bhd
B2B FinPal is operated by B2B Finpal Sdn Bhd. It is a subsidiary of B2B Commerce,
founded by Dr. Lee Thean Seong. He held a senior management position for
Hewlett Packard in Malaysia and Singapore.
As of March 2018, the platform had successfully raised about RM15 million by
issuing invoice financing notes. B2B Finpal offers the largest number of invoice
financing notes to-date.
39
Comparison of All P2P Lending Platforms in Malaysia
Funding
Description Fundaztic QuicKash Alixco Nusa Kapital B2B FinPal
Societies
Initial deposit for

RM1,000 RM0 RM0 RM0 RM0 RM1,000
registration
Minimum investment RM100 RM50 RM100 RM500 RM500 RM100
Maximum investment Recommended Recommended

RM50,000 No limit RM50,000 RM50,000
for individuals RM50,000 RM50,000
Business
Business loan
loan or Business Business
Financing type Business loan Business loan or Invoice
Invoice loan loan
financing
financing
1 - 24 1 - 24
Financing tenure 3 - 60 months 6 - 24 months 2 - 6 months 1 - 6 months
months months
0.16% - 2%
1.25% -
of each
1% of each 1.5% of 1% of each 10% on 30% sharing on
Service fee repayment
repayment each repayment return interest
or 15% on
repayment
interest
Bullet or Bullet or
Repayment type Instalment Instalment Instalment Instalment
Instalment Instalment
Investment
High Medium Low Very Low Very Low Medium
opportunities
Auto invest option Yes Yes No No No Yes
Mobile application Yes Yes Yes No No Yes
40
Which P2P Lending Platform Should You Use? – My Humble
Opinion
Frankly, I’ve signed up for all accounts except for Nusa Kapital. After doing
thorough research and comparison of each P2P lending platform, I am currently
only using Funding Societies and QuicKash.
Why I Choose Funding Societies?
I hold more than 80% of my P2P lending portfolio in Funding Societies alone. The
obvious reason is that it’s the currently the best P2P lending platform in Malaysia.
Let me explain to you why.
“ Make the right move

at the beginning
would save 99% of
“
your effort to score.
41
Why I Choose Funding Societies?
My Personal Portfolio Performance to Date:
Annualised return of 13.13% with Zero default. So Far so Good!
42
5 Reasons Why Funding Societies is the Best P2P Lending
Platform in Malaysia
1. Proven Track Record
The popularity of Funding Societies has surged significantly since its launch in
2017. The most obvious reason is due to its proven track record of success in
the P2P lending industry. It’s the first and largest P2P lending platform holding a
dominant market position within the industry in Malaysia.
In a short span of time, Funding Societies has established a strong foothold with
the following notable achievements:
July 2017 – Funding Societies is the only P2P lending company from Southeast
Asia included in the Prestigious Fintech 250 List.
October 2017 – Funding Societies wins Global SME Excellence Award from United
Nations’ ITU Telecom Unit.
It’s also the only P2P lending company featured in the Emerging 50 Rising Stars in
the Top Fintech 100 list in 2018. The list is a compilation of the best FinTech
innovators from around the world. Funding Societies had also successfully raised
$25 million in Series B funding led by Softbank Ventures Korea in 2018.
43
1. Proven Track Record (continued)
Besides, Funding Societies also entered into strategic collaboration and

partnerships with RHB Bank, Curlec and MoneyMatch to increase its market share
as well as to streamline its business operations.
P2P lending was likened to a pyramid scheme and has drawn much skepticism
from all quarters when it was first introduced in 2016. The credibility of a P2P
lending platform is more important than ever to gain trust from the investors. The
success story of Funding Societies has busted the myths surrounding P2P lending
in Malaysia.
As a rational investor, it has definitely boosted my confidence to make my first

move in P2P lending investment.
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2. High Investment Opportunities
Funding Societies is the go-to alternative for SMEs seeking for business loans due
to its strong presence in the industry. As a result, it has the highest investment
opportunities among the P2P lending platforms.
What’s an investment opportunity in P2P lending?
Imagine now you’ve RM1,000 cash to invest in P2P lending. And you’ve chosen a
P2P lending platform XYZ. You’ll be holding the cash without any returns if there’s
no borrower raising funds through the platform.
Why is it important to have high investment opportunities?
Let’s say you’ve invested RM5,000 in an investment note that offers 10% simple
interest with 12 months maturity. You’ll get 12 equal monthly installments of
RM458.33 (principal + interest). If XYZ has only 1 investment note throughout the
year, you’ll only earn 10% return on investment.
In contrast to another scenario where XYZ has investment notes every month with
the similar loan terms and you re-invest your RM458.33 repayment every month.
Instead of 10%, you will get a much higher return of 17.97% p.a.! Because every
month when you get back RM458.33, it will earn another 10% p.a. in the following
months.
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2. High Investment Opportunities (continued)
That’s the difference between simple and effective interest.
The effective interest rate will just be a number on the paper if you don’t even
have the opportunity to re-invest! Funding Societies offers high frequency and
sizeable investment notes. That gives investors the opportunities to compound
their returns throughout the year. Therefore, Funding Societies will be the best
choice if you wish to maximise your returns from investing in P2P lending.
3. Low Default Rate
There’s a common myth where many investors think that there’s a lack of credit
control in P2P lending. This is clearly not the case. Funding Societies has
maintained a low default rate of below 1.5% across the region since day 1. At the
time of writing, the default rate is only a mere 0.88%.
It’s considerably very low as most SMEs seeking for alternative financing have
lower creditworthiness due to lack of credit history. In other words, the
borrowers’ due diligence and credit assessment processes in place are working
effectively.
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3. Low Default Rate (continued)
Interestingly, Funding Societies doesn’t assign a risk rating to each investment

note, unlike other platforms. It provides commentary disclosures about the
potential risks of the investment notes based on its in-house analysis. Funding
Societies also provides information about the Directors’ creditworthiness,
company’s background and litigation exposure if any.
It gives the investors a clear perspective to help understand the nature and
underlying risks of the investment notes. It’s more helpful to me as compared to
those risk ratings that are made up of alphanumeric characters only. God knows
what those A or B or C mean?
4. User-friendly and Great User Experience
Funding Societies’ platform is very user-friendly even for the beginners. It also has
a mobile application with excellent user interface designs. Besides, your
investment portfolio and account details are always accessible 24/7.
47
4. User-friendly and Great User Experience
The user interface design of Funding Societies’ mobile app

48
4. User-friendly and Great User Experience (continued)
Funding Societies auto-calculates the income and expenses for your investment
portfolio. You can find out your portfolio’s performance anytime at a glance.
Further, you can also browse through all the available investment notes together
with the investment factsheets. Funding Societies will notify you whenever there’s
a new investment note. So that you can invest anytime, anywhere with just a click
of a few buttons using the mobile app.
Besides, the sign-up process is very fast and straightforward. (I will show you the
step-by-step guide in the next chapter.)
5. Convenient and Easy to Invest
Funding Societies also offers an auto-investment tool to the investors. You can
pre-set your preference on the amount, types of financing, interest rate and
tenure using the auto-investment tool.
The tool will help allocate your money to the investment notes that match your
requirements. Funding Societies will notify you when your money is allocated to
any particular investment note. So that you still have a choice to opt-out before
the investment note goes live.
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5. Convenient and Easy to Invest
Funding Societies’ auto-investment tool
The auto-investment tool makes everything easy and convenient for those with
never-ending busy schedules. It’s kinda cool, isn’t it?
50
Other Tidbits About Funding Societies
Funding Societies has also set up a community – Crowdfundtalks for all investors.
Investors can discuss and share their experiences with one another on investing in
P2P lending. Therefore, you can always find answers to your burning questions
about investing in P2P lending through Funding Societies.
On top of that, Funding Societies also rewards you for signing up as an investor. If
you sign up via a referral link, Funding Societies will credit a FREE RM50 bonus
into both the referral’s and your account when you invest at least RM1,000.
If you are interested, you’re more than welcomed to sign up via my referral
link: Sign up to invest in Funding Societies. Alternatively, you can also enter my
referral code: jler3bcm to grab the RM50 bonus.
RM50 is equivalent to 5% return on your initial investment of RM1,000 on day 1.

More importantly, it doesn’t cost anything for you to sign up!
SIGN UP FOR FREE
51
Why I use QuicKash as well?
Though I invest in P2P lending mostly through Funding Societies, I do hold a

portion of my portfolio in QuicKash as well.
You may be puzzled as to why will I choose QuicKash to invest in P2P lending. As
depicted in the comparison table above, the service fee for QuicKash doesn’t
really look competitive. The fee also appears to be at the higher end as compared
to other platforms.
QuicKash also doesn’t offer high investment opportunities. And the interest rates
on the investment notes are generally lower. Yes, I know. It contradicted with the
main reason on why I choose Funding Societies as my choice. The main and the
only reason why I choose QuicKash is all about diversification.
The inherent risk of investing in P2P lending is the risk of default by the issuers
when they fail to make their repayments on time. The best way to minimise your
risk is to diversify your loans portfolio as what I’ve highlighted in Chapter 3 earlier.
The beauty of QuicKash is that it charges the issuers a guarantee fee upfront for
guarantee services provided by a third-party guarantee corporation. It deducts
directly from the financing amount. QuicKash claims all investment notes with
good credit rating come with a principal guaranteed element. It discloses that the
investors will never lose their principal investment amount even if the issuer fails
to repay.
52
QuicKash investment note that I have invested with a

principal guaranteed element
53
Besides, QuicKash doesn’t impose a limit on the investment amount for retail
investors. For obvious reasons, I choose QuicKash to diversify my loans portfolio to
minimise my risk of investment. The only downside is QuicKash’s investment
opportunity is significantly lower than Funding Societies. You’ve to be really
patient if you want to invest through QuicKash.
Getting Started with QuicKash
Unfortunately, QuicKash doesn’t offer any referral bonus. But in my humble

opinion, it’s still a good choice for investors. For those who are interested, you can
click on this link to sign up: Sign up to invest in QuicKash.
SIGN UP FOR FREE
54
Review of Other P2P Lending Platforms
Now, let’s take a closer look at the other P2P lending platforms. And let me
explain to you why I’m not using them.
Alixco & Nusa Kapital
First off, I’ll start with Alixco and Nusa Kapital. I got to be brutally honest with you,
these two are never my options. I’ve signed up an account with Alixco, the process
is fairly simple and straightforward. But the biggest problem is that Alixco offers
extremely limited investment notes with small amounts. Here’s the quick
snapshot of the investment notes:
Alixco’s investment opportunities

55
Alixco & Nusa Kapital (continued)
Nusa Kapital is not any better though the world’s first regulated Shariah-compliant
P2P lending platform is a good selling point.
Fundaztic
Fundaztic is the only P2P lending platform that allows a financing with maturity up
to 60 months. But most of the investment notes I’ve browsed through typically
range from 12 to 36 months. Fundaztic does offer quite a number of investment
notes on its platform.
56
Fundaztic
Fundaztic is the only P2P lending platform that allows a financing with maturity up
to 60 months. But most of the investment notes I’ve browsed through typically
range from 12 to 36 months. Fundaztic does offer quite a number of investment
notes on its platform.
Fundaztic’s investment opportunities
57
Fundaztic (continued)
Personally, I’m not comfortable investing via Fundaztic. The main reason is that
the tenure of the loans is too long hence doesn’t fit my risk appetite. P2P lending
primarily caters the financing needs of the SMEs which typically have lower
creditworthiness. The reality is that the sustainability of these SMEs is not
guaranteed.
Having considered the high probability of default as shown above, loans with
tenure more than one year would definitely amplify the risk of default. If you have
a higher risk preference, Fundaztic can be one of your options.
B2B Finpal
Though the investment opportunities are not as high as Funding Societies,

B2B Finpal offers quite a fair number of investment notes. The only drawback is
that the service fee charged by B2B Finpal is relatively higher than the other P2P
lending platforms. It charges the investors a service fee equivalent to 30% of the
interest earned.
Besides, it doesn't provide such detailed financial performance and other

background information like Funding Societies for the investors to do their own
due diligence before investing. Last but not least, it will be very troublesome for
me to manage my investment across too many P2P lending platforms. Two are
just nice.
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Author’s thoughts
“ After comparing all factors such as investment opportunities and

credit assessment other than the service fees, Funding Societies
remains my favourite choice.
Again, it’s individual preference and it’s really up to you. I just

want to remind you to make your choice wisely! Not only a good
P2P lending platform can help you maximise your returns
through reinvestment opportunities, it also reduces your risk by“
offering you high investment opportunities for diversification.
Feeling ready now? Great!
Get started with investing in P2P lending now.
SIGN UP FOR FREE
59
CHAPTER FIVE
A Step-by-Step Guide to
Once you’ve clicked on this referral link – Sign up now, you will be directed to the
following sign up page.
After you click “Sign up now” button, it will lead you to the following page. Key in
the following details:
a) Full Name as per IC/Passport

b) Email address
c) Set account password
d) Mobile phone number
60
Once done, it will lead you to the next page and you’ll need to key in your
personal details:
a) Gender
b) Birthdate
c) Residential address
d) Citizenship & NRIC number. (For non-Malaysians, you’ll need to key in your
passport details)
61
62
You’re almost there! Last but not least, you’ve to upload your national card ID
front and back (passport for non-Malaysians) for account verification.
Sign up is now complete! Now you’ve to wait for Funding Societies to verify and
approve your account registration. It took me only less than two days.
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How to Start Investing in P2P Lending?
Account approved? Awesome! Next, familiarise yourself with the P2P lending
platform first. Once you logged on to your account via Funding Societies, you’ll be
able to see the overview of your account.
Go to investment opportunities. You’ll see all the available investment notes on

the platform. There are two financing types that you can choose to invest, either
business term financing or invoice factoring. The financing types will affect your
risk and returns. (Don’t worry. I’ll explain on how to choose an investment note to
invest safely and maximise profits in the next chapter. Don’t miss it!)
64
Before you invest, click on the PDF icon at the top right corner. That’s the
investment factsheet. It’s HIGHLY advisable to read the factsheet to find out
everything about the investment note before you invest. (I’ll explain in the next
chapter what are the key areas that you should look for before investing.)
65
Confirm Your Investment
Once you’ve decided on any particular investment note to invest, you need to key
in the amount and confirm your investment.
“TADA!” Congratulations! You’ve made your first investment in P2P lending!
You can download Funding Societies mobile application from the Playstore/App
store. It’s very user-friendly and you can invest anytime with just a click of a few
buttons.
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CHAPTER SIX
A 3-Step System to Grow Your

Wealth via Funding Societies
If you’re reading this chapter now, please give yourself a pat on the back.
Congratulations!
It says something about you.
You are not jumping in right away to invest despite the irresistible high returns. It
means that you’re a rational investor. You spend the time to study and analyse
before making your first move. That’s BRILLIANT!
In this chapter, I’ll share with you a simple 3-step system to invest in P2P lending.
This system will help you grow your wealth by maximising your returns at the
lowest risk possible through Funding Societies.
Before that, let me show you how investing in P2P lending strategically can grow
your wealth quickly over time.
67
How Investing in P2P Lending Can Grow Your Wealth
Investing in P2P lending can grow your wealth magically through the power of
compounding.
“ Compound interest is the eighth wonder of the

world. He who understands it, earns it … he who
doesn’t … pays it.
“
– Albert Einstein
68
The best part is that the magic of compounding works perfectly in P2P lending
mechanism as an investment instrument.
WHY?
When you invest in the investment notes offered by Funding Societies that are
business term financing type, generally you’ll receive the repayments in equal
monthly installments with some exceptions.
That means, when you receive your monthly repayment from 2nd month onwards,
you can re-invest the amount received in new investment notes. As a result, you
will earn additional interest in the subsequent months.
Based on my past experience, the interest rate typically ranges from 12% to 16%
for business term financing.
69
Let’s assume the first investment note that you’ve invested gives you only 12%
interest per annum for a more conservative calculation. In the subsequent
months, you re-invest your monthly repayments in new investment notes that
offer the same interest rate.
Want to know what’s your total return and how much interest you can actually
earn?
70
Initial capital: RM10,000

Interest rate: 12%
Monthly repayment: RM933.33 (Before reinvestment)
Total principal + interest received: RM12,055 (After reinvestment)
71
Based on the illustration above, your net return (assume an average service fee of
1%) would be 18.6% instead of 12%! (Refer to the calculation in the Excel
worksheet: Compounding returns calculation)
That’s how the compounding effect works in P2P lending investment.
And this is not all…
Imagine you stay invested in P2P lending for the next 10 or 20 years or even until
you retire. Say you’re 25 years old this year and you plan to invest RM10,000 until
55 years old. For simplicity sake, use the formula below to see how much you’ll
get at the age of 55.
(RM10,000 * (1+Interest rate/month) ^ Number of months)
Interest rate per month is 1% (12% divided by 12 months).

Number of months is 360 (30 years * 12 months).
RM10,000 * (1+0.01) ^ 360 months = RM359,496
Isn’t it very impressive?
72
And what if on top of RM10,000 that you’ve invested on day 1, you top up RM500
every month to invest in P2P lending for the next 30 years?
The magic number would be… RM2,106,978!!!

If you’ve a BA II Plus calculator, you can calculate the number with the following
input:
N = 360
I/Y = 1
PV = 10,000
PMT = 500
CPT FV = ???
Well, it’s all mathematics.
73
Now, let’s get serious about money. Here’s the 3-step system to invest in P2P
lending effectively via Funding Societies.
1st Step: Set your investment budget and allocate your money
First of all, you’ve to set an investment budget before investing in P2P lending.
The budget differs based on individual personal goals and risk appetite. But more
importantly, you should always set aside enough emergency fund apart from your
investment sum. This should apply regardless of what investment you’re going to
make.
Next, you need to allocate your money for each investment note based on your
budget.
As what I’ve highlighted in Chapter 3, the most effective way to reduce your risk of
investing in P2P lending is through diversification. And you can only diversify
effectively by allocating the optimal amount to invest in each investment note.
74
How much should you allocate for each investment note?
The amount that you allocate to each investment note as a percentage of your
entire budget should be benchmarked against the historical default rate of
Funding Societies.
Funding Societies has a default rate of approximately 1% at the time of writing.

Since the minimum investment amount for each note is RM100, it represents 1%
of your total portfolio if you set a budget of RM10,000 on day 1.
(RM100/RM10,000 * 100% = 1%)
That means your portfolio will be fully diversified if you invest in 100 different
investment notes with RM100 each.
In the event of default, it’s safe to say that out of 100 investment notes that
you’ve invested, only 1 loan will default if Funding Societies maintains its default
rate. And even if there’s a default, your return will be mouth-watering based on
the illustration shown in Chapter 3.
75
What if you have an investment budget of less than RM10,000?
Don’t have so much to invest on day 1? That’s okay! Even if you set a budget of
RM5,000, RM100 investment only represents 2% for each note. (RM100/RM5,000
* 100% = 2%) It’s still considerably low risk based on the low default rate that
Funding Societies has maintained so far.
Even if you are starting out with only RM1,000, you can top-up your investment
gradually every month until it reaches the optimal amount. With this method,
you’ll reduce your risk significantly over time.
Or, if you do proper due diligence when choosing the investment notes before
investing, your risk of default will be significantly mitigated. That’s what I’m going
to talk about in the next step.
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Do not over-diversify!
However, you should never over-diversify your portfolio. Let’s say you’ve a
RM50,000 budget but you only invest RM100 in each investment note. Each
investment note represents only 0.2% which is way lower than the historical
default rate. Plus, you need to invest in 500 investment notes to fully invest your
money.
How long do you think you need to invest in 500 investment notes as compared to
100? Not only it doesn’t reduce your risk effectively, you’ll not be able to
maximise your returns.
Another key takeaway is that you shouldn’t expect that your whole budget will be
fully diversified immediately. Because it’s impossible that you’ll have 100
investment notes available to invest at once on day 1.
The honest truth is that it takes time. But effortless! Trust me, the time that
you’ve waited will be definitely rewarding. The benefits will significantly outweigh
the costs only if you fully diversify your investment using the method above.
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2nd Step: Choose Investment Notes
Certainly, Funding Societies has already put in place an effective credit assessment
based on its proven track record. As highlighted earlier, your returns would still be
much higher than the losses in the event of default if your portfolio is effectively
diversified.
But as a diligent investor, it’s important to know how to do your own due diligence
when choosing an investment note. No one likes it when there’s a default right?
If you follow proper guidelines when choosing an investment note, your own
portfolio may even have a much lower default rate than the others who invest in
all investment notes.
That’s how you can maximise your returns and grow your wealth quickly.
In chapter 3, I’ve introduced a few important metrics to help you choose an

investment note with lower risk to invest. Let’s put those in practical use now.
Before you invest in any investment note, always download the factsheet
provided by Funding Societies. I’ll use a sample factsheet and break it down into
three parts for illustration.
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1st Part – General Details
The first part comprises the general details of the investment note including the
financing amount, investors’ net return and repayment schedule.
79
Tip #1 – Financing type and repayment methods
There are two financing types – invoice financing and business term financing.
These two financing types typically have different repayment methods - bullet
repayment and monthly repayment.
For bullet repayment, you’ll receive interest every month and the principal will
only be repaid at the maturity date. In the event of any default, you’ll sustain
higher losses as compared to an investment note with monthly repayment
method. Because for the monthly repayment method, you’ll get back at least a
portion of your principal on a monthly basis on top of the interest earned.
Invoice financing also poses a potential fraud risk. The borrowers only repay the
financing after their debtors settle the invoices. There’s a risk of the borrowers
falsifying the invoices to get money through P2P lending. Though such cases are
rare but no one can guarantee that it will never happen. In other words, invoice
financing is inherently more risky than business term financing.
But it doesn’t mean that you can’t invest in invoice financing at all. The beauty of
it is that the maturity normally ranges 1 to 4 months only. You’ll have a much
better liquidity position from investing in invoice financing notes.
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Tip #1 – Financing type and repayment methods (continued)
As part of the investing strategy, you can allocate a smaller amount to invest in
invoice financing. I only invest RM300 in each invoice financing while I’ve
allocated RM500 for each business term financing.
Another tip is that many invoice financing borrowers are recurring customers.
Their repayment records will be a good indicator of their creditworthiness.
81
Tip #2: Borrower’s operating industry
You should also pay attention to which industry the borrower is operating in.
Some industries tend to have higher risks than the others during certain periods,
especially for cyclical businesses.
For example, construction companies may not be favourable during times when
the Government scales back mega-infrastructure projects and reduces
infrastructure expenditure.
You may also want to avoid palm oil companies when there’s a negative outlook
on palm oil price due to oversupply from Malaysia and Indonesia.
These are just a few examples to give you a feel of how a borrower’s operating
industry may affect your risk of investment.
82
2nd Part – Company’s and Director’s information
The 2nd part consists of the background information of the company and its
Directors like payment history, litigation, etc.
83
Tip #3: How long the company has lasted?
A long-established company has a lower business risk as compared to a new start-

up company.
Tip #4: Litigation status
A company with ongoing litigation cases typically has a higher risk of default.
Tip #5: Directors’ payment history
Company and its Directors with bad repayment records will expose you to a higher
risk of default.
84
3rd Part – Historical Financial Information
Last but not least is the historical financial information of the company. Generally,
it includes the audited financial information and also the current year
management accounts. Besides, the information on bank balances based on the
latest bank statements are available as well.
Tip #6: Profit history
A company that has been consistently making losses for the past few years has a
higher risk of default as compared to a profitable company.
85
Tip #7: Current ratio must be positive
Current ratio measures the company ability to pay short term obligations. Current
ratio is positive when its current assets are higher than current liabilities. In other
words, a positive current ratio indicates that the company has the ability to repay
its liabilities within 12 months.
Final Step: Re-invest and stay invested
As illustrated in the example earlier, the compounding effect will help you grow
your money magically over time. However, this can only be done if you keep re-
investing your money and stay invested in P2P lending.
Reinvestment also reduces your risk of investment other than maximising your
returns. Because when you maximise your frequency of investing whenever you
have available funds, the returns would be much higher. So even when a default
really happens, your returns would easily exceed the potential losses.
The longer you invest, the lower the risk of investing in P2P lending. And of
course, the faster your wealth grows.
86
Grow Your Wealth Now
The 3-step system above applies purely mathematics
and common sense. It’s easily understandable and
practical to apply for anyone. Doesn’t matter whether
you are a seasoned investor or new to investing.
Investing has never been easier. Sign up now using the

link below and get a free RM50 bonus.
JOIN NOW FOR FREE
87
Final Thoughts
Final Thoughts
P2P lending in Malaysia has been growing at an exponential pace since its
emergence in 2016. The most obvious reason is because of its promising high
returns with more than 10% per annum. Also, it doesn’t require specialised
financial knowledge or day-to-day monitoring.
Not to also mention it requires only RM100 to start investing!
Sounds too good to be true? Feeling skeptical?
Why am I not surprised…
Frankly, I was really anxious in the first few months of investing in P2P lending.
“What if I don’t get back my money?” “What if it’s a scam?” These questions were
floating in my mind every night despite I only started investing after thorough
research.
But after I received my repayments for months while looking at the numbers, I
was grinning to myself. I know the 3-step system is working perfectly for me.
With an entry requirement as low as only RM100, don’t you really think that it’s
worth a try? Do you want to brush it off as an investment alternative just like that
without getting a better understanding?
88
Final Thoughts
What other investment options that are more attractive to you? How has KLCI
stock market been treating you? Fixed deposits? Or, Unit Trusts?
It’s now all over to you…I’m no expert in investing. But I believe that you as a
brilliant investor can form your own judgment based on all the information
available and make the best of any present investment opportunity.
And especially when every piece of information including the historical results and
data are all easily accessible at your fingertips!
If you still have any doubts or questions, refer to the FAQs on P2P lending below.
Thank You!
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find this guide useful, please feel free to share the content of
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89
FAQs on P2P Lending in
Malaysia
Malaysia
General
What is P2P lending/financing?

P2P lending is basically loan of money to individuals or businesses through an
online marketplace that matches between the lenders and borrowers.
Who are the borrowers?

Borrowers are typically individuals seeking for personal loans or companies
sourcing funds for business purposes.
Who are the lenders?

Lenders are generally investors who seek to earn passive income in the form of
interest on the loans lent out.
What is a P2P lending platform?

A P2P lending platform is an intermediary. It facilitates the loan transactions by
connecting the borrowers directly to the lenders. It earns money by charging
origination and servicing fees.
Is P2P lending legal in Malaysia?

P2P lending is regulated in Malaysia. In 2016, Securities Commission Malaysia (SC)
introduced a regulatory framework to govern the industry. However, SC prohibits
the operators to offer personal loans.
Malaysia
General
Who are the P2P lending platform operators?

There are six (6) licensed P2P lending platform operators to date.
Funding Societies Malaysia – Modalku Ventures Sdn Bhd

Fundaztic – Peoplelender Sdn Bhd
QuicKash – QuicKash Malaysia Sdn Bhd
AlixCo – FBM Crowdtech Sdn Bhd
Nusa Kapital – Ethis Kapital Sdn Bhd
B2B FinPal – B2B Finpal Sdn Bhd
You can refer to Chapter 4 for the full review and comparison of all P2P lending
platforms in Malaysia.
Who can be a P2P lending platform operator?

A P2P lending platform operator must be approved by the SC.
Based on SC requirements, an operator must be incorporated under Companies

Act 1965 with a minimum paid-up capital of RM5 million.
Among other criteria, the directors of an operator must demonstrate that they are
fit and proper to operate such business. Besides, the operator must also ensure
that a transparent and effective risk scoring system is in place.
Malaysia
General
What are the obligations of a P2P lending platform operator?

The obligations of an operator include determining the suitability of the issuers
and ensure compliance of its platform rules. This involves background checks,
credit assessment, disclose relevant information to investors etc.
The operator also must place the amounts deposited by both investors and issuers
in a 3rd party trustee account before making any disbursement. SC had also issued
additional guidelines for the offering of Islamic investment notes.
What are the types of financing?

There are two types of financing – Business Loan Financing and Invoice Financing.
What is an invoice financing?

Invoice financing allows issuers to raise funds based on the value of their
customers’ invoices. In other words, issuers sell their customers’ receivables to get
money upfront before customers pay them.
Example:
Issuer A issues to Customer Z an invoice with an amount of RM100 with 30 days
credit terms. Issuer A can raise (RM100 – service fee) through a P2P lending
platform immediately with a few months maturity date.
After customer Z settles the invoice, Issuer A will repay the outstanding financing.
Malaysia
General
What is a Business Loan Financing?

The term differs between the P2P lending platforms. Business loan financing
generally refers to funds raised for working capital or expansion purposes. The
loan tenure typically ranges from 1 month to 24 months. With the exception for
Fundaztic, it’s the only platform that allows a business loan financing raised up to
60 months.
Malaysia
Issuer
Who can be issuers?
An issuer is a borrower that issues an investment note on P2P lending platforms.
Issuers must be locally registered businesses. Either as sole proprietorships,
partnerships, incorporated limited liability partnerships, private limited companies
or unlisted public companies.
How much is the amount that issuers can raise?

SC does not impose a limit on the amount that issuers can raise on a P2P lending
platform. But the limit of the amount and interest rate will depend on each
platform’s own credit assessment.
Can issuers still raise funds on a P2P lending platform if the amount does not
meet the target?
Issuers can only receive funds if at least 80% of the amount has been raised on a
P2P lending platform.
Can issuers raise funds through multiple P2P lending platforms at the same
time?
Issuers can only raise funds with different purposes via multiple P2P lending
platforms concurrently. However, the issuers have to disclose to each platform
operator.
Malaysia
Issuers
Do issuers need to go through any credit assessment procedures like banks?

Yes. Any issuer has to submit the necessary documents to the P2P lending
platform operators to conduct due diligence. They also need to go through the
Anti-Money Laundering and Counter Financing for Terrorist assessments for
regulatory compliance.
The process will be much faster because the procedures are more straightforward
as compared to the banks.
Do issuers need to provide any collateral to raise funds?

No, issuers do not need to provide any collateral to raise funds through a P2P
lending platform.
How long is the loan tenure?

The loan tenure that each P2P lending platform offers is different but ranges from
1 – 60 months.
How do issuers make repayments?

There are two types of repayments – monthly repayment or bullet repayment.
Monthly repayment normally applies to business loan financing. Bullet repayment
refers to a one lump sum repayment made by issuers at the maturity date of a
loan.
Malaysia
Issuers
What are the charges for issuers to raise funds?

Each P2P lending platform typically charges a one-off application fee and
origination fees when funds are raised successfully.
Can issuers make early repayment before the maturity date of a loan?
Yes. But an early repayment fee applies.
Malaysia
Investor
Who can invest in an investment note offered on a P2P lending platform?

Investment opportunities are open to all investors. However, SC encourages retail
investors to limit their exposure to a maximum of RM50,000 at one time on any
investment note.
Some P2P lending platforms categorized investors into retail, institutional and
high net worth investors. Each category has a different limit to invest in the
investment notes.
What information can investors get before participating in any investment note?
A P2P lending platform operator needs to disclose the relevant information of an
issuer to the investors. The information includes the purpose of the financing, key
characteristics of the financing, issuer’s financial information. Investors can also
access the general risk warnings and risk disclosure of the issuer.
What happens if the funds raised do not meet the target amount of the
investment note?
If the funds raised do not reach 80% of the target amount, the operators will
refund to the respective investor.
How often do investors receive repayments?

Depends on the types of financing. For a business loan, investors will receive
equal monthly installments comprising interest and principal until the maturity
date. For invoice financing, investors normally get a one lump sum payment at the
maturity date.
Malaysia
Investor
What returns do the investors get?

Investors will get (interests – service fees) as their returns assuming there’s no
default.
What happens if there is a late repayment?

Investors will get late interest payments.
What happens if an issuer defaults on repayments?
A default occurs when a repayment due exceeds a stipulated period. P2P lending
platform operators will facilitate to either restructure the loan with the issuer or
outsource to a collection agency.
As a last resort, the platform operators may raise funds from investors to initiate
legal proceedings to recover the amount. However, the operators will not
reimburse any losses to investors in the event of a default.
QuicKash, one of the approved P2P lending platform operators offers investment
notes with a principal guaranteed element. It charges a guarantee fee to an issuer.
In the event of any default, the principal amount of the investors will be
protected.
What is an auto investment tool?

There are a few P2P lending platform operators which offer an auto investment
tool to the investors. The auto investment tool will match the investment notes
based on investors’ criteria. And it also invests automatically on behalf of the
investors.
Malaysia
Investor
What is the initial amount requirement for investors to invest in a P2P lending
investment note?
The initial amount requirement differs between P2P lending platforms but ranges
between RM50 – RM500. Some platforms require investors to make an initial
deposit to register an account. Once the registration is successful, investors can
use the deposits to invest in any of the investment notes.
How do investors ensure the amounts deposited with P2P lending platforms are
safe?
SC mandated that all P2P lending platform operators must place the amounts
received into trust accounts maintained by trustees (i.e. banks) before making any
disbursement to either borrowers or investors.
What are the risks of investing in P2P lending?

The main risk is the risk of default. Investors may lose their principal amounts
invested in the event that issuers fail to make repayments. There are other risks
such as liquidity and prepayment risks.
Refer Chapter 2 for full understanding.
How do investors minimize their risks of investing in P2P lending?

Investors can significantly reduce their risks of investing in P2P lending by
diversifying their loans portfolio. The returns from the investment notes can
outweigh the losses in the event of any default in long run.
Refer Chapter 3.
Malaysia
Investor
What are the charges to invest in P2P lending?

There is a service charge to investors for investing in P2P lending. P2P lending
platform operators will deduct the fee directly from investors’ returns. Each P2P
lending platform has a different fee structure. Refer Chapter 4 for a comparison
between the platforms.
Can investors cancel their investments once they opt-in?

Once investors confirm their investments in any investment note, they cannot
cancel.
Can investors withdraw their money from the account anytime?

Yes. Investors can withdraw the uninvested funds from the account anytime.
Is the interest earned taxable?

Yes, it is taxable for both Malaysia tax residents and foreign citizens.
For Malaysia tax residents, investors need to declare the interest earned as
income during annual tax return filing.
For foreign citizens, P2P lending platform operators will deduct 15% withholding
tax directly from the returns.
Is the investors’ personal information confidential?

Yes. P2P lending platform operators will keep the personal information
confidential.

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PUBLICATION OF WORLD BIZWEEK -

THE ULTIMATE GUIDE TO

Feel free to provide your comments or suggestions at worldbizweek@gmail.com.

Chapter 1: The Mechanism of P2P Lending

Chapter 2: Understand the Risks of

Chapter 3: Strategies to Minimise Your Risk

Chapter 4: A Comparison of All P2P Lending

Chapter 5: A Step-by-Step Guide to

Chapter 6: A 3-Step System to Grow Your

Trust me, I was once like you.

As an investor, I need to make sure that I understand everything about an

Let’s get started!

The Mechanism of P2P

Borrowers are typically individuals seeking for personal loans or companies

Traditional banking process

Peer-to-Peer Lending Process

a) Simpler and speedy process

b) Lower eligibility criteria

c) Lower interest rates

d) Loans are unsecured

a) Loan amounts may not be available

b) High interest rates

a) Low investment capital

b) Higher return on investment

e) Discretion over investment

Obligations of P2P Lending Operators in Malaysia

Based on SC requirements, a P2P lending operator must be incorporated under

The obligations of an operator include determining the suitability of the issuers

No. P2P Lending Platform(s) Operated by

I’ve included a comprehensive review of these P2P lending platforms in this

Understand the Risks of

Besides, P2P lending operators may outsource to debt collection agencies to

3. Business Risk of P2P Lending Operators

How About P2P Lending Operators in Malaysia?

Fortunately, such risk is less prevalent in the context of Malaysia P2P

Investing in P2P lending is also exposed to prepayment risk. Prepayment risk

The brutal truth is that there’s no risk-free investment in reality.

Strategies to Minimise Risk

Is P2P lending legal in Malaysia?

Is it safe to invest in P2P Lending?

It’s indeed a common investment philosophy that everyone understands. Perhaps,

Investors always use diversification to reduce concentration risk in their

“ Investors have been so oversold on

It simply means that if you’re investing in two borrowers with similar

Why is it a big deal?

The effectiveness of a diversification strategy also depends very much on the

Initial investment: RM10,000 (A)

No. Investment 12% Interest No. Investment 12% Interest

No. Investment 12% Interest No. Investment 12% Interest

You may refer to the calculation in the Excel worksheet: Scenario 1

As an investor, it’s definitely great to be conservative. For whatever reason,

Initial investment: RM10,000 (A)

No. Investment 12% Interest No. Investment 12% Interest

You may refer to the calculation in the Excel worksheet: Scenario 2

For example, Funding Societies provides an opinion-based assessment and

Therefore, it’s important to understand the characteristics of each P2P lending

• Loan tenure – A loan with a longer tenure poses higher uncertainty as

• Historical financial information – Some of the P2P lending platforms

• Age of the borrower – A new business has a higher risk of default as

• The industry of the borrower – Certain industries tend to be riskier than

• Repayment history – Some borrowers are recurring customers of the P2P

“ Again, there’s no risk-free investment in this world. A