The P2P Lending Scene in Malaysia
I’ve been receiving inquiries on and off on what P2P platform I’m currently in. And if you’ve been reading the blog for a while, you’d know I had some money in Funding Societies. However, due to their increasing defaults, I’ve pulled out most of my capital.
Over the past few months, I’ve been looking to re-invest in the sector. I’m on the lookout for lower risks and default rates, somewhere my money can grow steadily at a reasonable rate of return. Which lead me to CapBay.
Types of Loans – Business Term vs Invoice Financing
During P2P’s infancy days, the loans offered by most platforms consisted of mainly business term loans. Which is, of course, the essence of P2P financing i.e. You lend money directly to businesses for a fixed period, typically between 12 to 36 months.
However, it is when the defaults came in that investors realized just how risky it was to hand out loans willy-nilly. And of course, the importance of really diversifying and not putting your capital into a few loans. Instead, when it comes to P2P financing, diversifying over many loans is advisable.
Fortunately for me, my returns today are still in the positive region. I’ve almost withdrawn 100% of my capital with a net return of 10+% per annum.
Right now, I’m looking to get back into the P2P scene as the industry as a whole matures. And I’m looking to lower my default risk by going for primarily Invoice Financing. There is lower risk here because investors are essentially lending money in the short term to SMEs based on a transaction.
In short, when an SME sells their services to a buyer on credit, they often must wait up to 6 months to get their payment. Invoice Financing allows these SMEs access to upfront payment. With Invoice Financing, the SME has already made the sale and the risk of default is actually transferred to the corporate buyer. Typically, Invoice Financing is for the short term, you’ll normally see a loan term of not more than 6 months.
CapBay specializes in providing Invoice Financing to SMEs who supply to blue-chip companies and government-related entities. Among the few P2P players in Malaysia, CapBay currently has had no defaults SO FAR since their launch in February 2020. This is no easy feat and caught my attention right away and got me digging for more info about them.
As reported by Fintech News Malaysia, CapBay is the fastest platform to hit RM100 million in P2P Financing. Typically, fast growth leads to problems with risk. The fact that they’ve managed to achieve this growth while still maintaining a 0% default rate is impressive.
How CapBay Works
CapBay works a little differently from the platforms I’ve used. They’re encouraging ”Auto-investing” whereby you let the platform pick the loans to invest in. As you all know, I’m a big fan of automating investments and so I will be using their Auto Invest feature all the way.
You choose from 3 different Auto Invest Profiles based on their respective risk profiles and potential return – Conservative, Moderate and Aggressive. If however, you want to have better control of your capital, you can choose to customize.
Within these 3 different profiles, you’ll find a further 3 categories of notes:
1. Select: Safer and lower return notes
2. Motor: Dealer financing notes
3. Diversified: Riskier and higher return notes
There’ll be a section for you to read up on these on the platform itself.
Another thing to note: Your uninvested funds will earn an estimated 1.7% per annum. This is a special feature called CapBay Plus that ensures you continue to generate returns on uninvested funds if you utilize their Auto Invest.
Simple Steps to Get Started
You’ll need RM10,000 to start
This one here got me thinking a little and I know RM10,000 is a huge amount to start with for many, myself included. But after looking at the 0% default rate for a year, as well as the expected net return of up to 10% per annum on their investment opportunities, I’ve decided to go ahead. I’ll be posting updates on the performance here, probably on a regular basis.
Registration took me about 5 minutes. All the usual KYC are required. I.e. pics of your IC and a 5-sec video upload.
If you don’t have a webcam, make sure you download the app and register there as you’ll need to upload a video during registration as part of their KYC requirements.
And finally, if you’re signing up and registering with CapBay, don’t forget to use my code and link for a free RM100. To qualify, you’ll have to make the RM10K deposit and select one of the Auto Invest profiles (Conservative, Moderate and Aggressive). The full terms and conditions can be found here.
Use my code: DIVMAGIC
I’ve added in RM10,000 to the Auto-Invest feature and selected the Aggressive profile.
The Auto-Invest feature was quick and my funds are 40% invested in a few days. Returns range from 7.3% to 9.7% currently.
Look forward to future updates to my P2P portfolio.
Risks of P2P
Please understand that I consider P2P investing a high-risk venture. Even with CapBay’s focus on Invoice Financing, I still consider this to be a risky investment. But how else can you expect a potential net yield of up to 10% per annum.
This is why I’ve been doing a lot of research and looking around the Malaysian market. I’ll be testing the waters with CapBay and will let everyone know how it goes via my updates.