Dividend Magic

Saving and Investing towards Financial Independence in Malaysia

Funding Societies Malaysia

Funding Societies – My First Default

By
Filed Under: Dividends, Financial Independence, Investment, Other Investments 9

First off, an update on my portfolio’s performance with Funding Societies Malaysia. Annualised returns have gone down from 13% to 9.23%.

A lower figure compared to January but still, a 9.23% return is commendable for an investment.

Mainly due to –
1. A default; and
2. New unutilised capital.

My First Default(s)

It caught me off guard when I first received notice on the default on the issued notes, of which I’ve put in RM300 each into the affected notes.

MBBT-18080032
MBBT-18080033
MBBT-18080034

Being caught off guard like that isn’t always a nice experience but it was mitigated somewhat because I’ve constantly been managing my own expectations and prepping for a few defaults.

Re-adjusting Funding Societies’ Auto-invest Bot

If you’ve noticed, all the notes come from a single issuer or company. So it’s back to the drawing board for me.

I’ve now switched my auto-invest bot settings to have ‘Max Issuer Exposure’ from the previous 25% to a mere 5%. I don’t want to be over-invested in one single issuer.

In the event that a single issuer defaults, my loss exposure will never exceed 5% of my total loan portfolio.

Steps Taken by Funding Societies

It all started on 7 January 2019. The issuer contacted Funding Societies to delay payment. Below will be the notices I received from Funding Societies. In chronological order.

This will be pretty lengthy but it is important you as investors know the step-by-step process taken by Funding Societies.

7 January 2019

Dear Investor, The Issuer has reached out to us to push back the repayment of January 2019 due amount because pending receivables from their client, this will include late interest charges. Tentatively, repayment of January 2019 due will be on 18 January 2019. Thank you for understanding the situation. Team Funding Societies 7/01/2019, 6.20pm

** And thereafter, lengthy amounts of back and forth discussions with the issuer on the settlement. I’ll spare you the details. With the issuer failing to make repayments in March, Funding Societies finally decided to serve a letter of demand.

10 April 2019

Dear Investor, We wish to update that we have served the Letter of Demand as of 8 April 2019. At this stage we continue to be in contact with Issuer through our lawyers to demand for RM 50,000 which due on 31 March 2019, and upcoming RM 150,000 which is due 15 April 2019. As we wait for Issuer response to the Letter of Demand, kindly allow us to update you by 17 April 2019. Team Funding Societies 10 April 2019, 8.30pm

18 April 2019

Dear Investor, We would like to inform you that Note Issuer has made a partial payment of total RM 10,000 and it has been distributed as principle to investors on 16 April 2019. However, the amount made by Issuer is less than what we have requested from the Issuer. We are still in the midst of negotiating the outstanding repayment term with Issuer. As per our last update, the Letter of Demand has been served to the Note Issuer, and the Note Issuer has only made payment of RM 10,000.00 of the promised RM 200,000.00 upon the expiry of the Letter of Demand on 17 April 2019. At the meantime, we are escalating our recovery efforts through legal avenues and are discussing with the appointed panel lawyer on how to approach this matter effectively. You may refer to your email for full update. Kindly allow us until 3 May 2019 to provide you updates on the progress of recovery. We truly appreciate your kind patience and continued support. Team Funding Societies 18 April 2019, 1.25PM

End.

So there you have it. I’ve said there would be defaults and I’m sharing with everyone the first of mine.

There are inherent risks in investing in P2P financing. To mitigate, I am diversifying as much as I can. Putting in small amounts in every note issued.

And now, as I’ve learnt the hard way, not to overexpose myself to one single issuer.

I hope everyone learns from this.

That being said, I am still getting a 9.23% return. So don’t let yourself be discouraged by my defaults.

😀

Sign Up!

If you have not already, you can sign up with Funding Societies hERE.
Alternatively, you may use the code: j1mwa37p
You’ll receive RM50 upon investing your first RM1,000.

Note:
Funding Societies has reduced their referral bonus from RM50 to RM30 effective 1st March 2019.

Using my code and link, you’ll still receive RM50.

Funding Societies – Risks, Defaults and Diversification

By
Filed Under: Financial Independence, Investment, Other Investments, Portfolio - Freedom Fund 8

Funding Societies Malaysia

This will be an update to my earlier post on Funding Societies, Malaysia’s (largest?) P2P platform.

As I have posted and shown earlier, my investments in Funding Societies has netted me an annualised return of 13.12%. As of today, it has increased slightly to 13.15%.

The referral bonus from you guys does not affect that 13.15% return. 

To put the returns into perspective, my IRR and average return for the Freedom Fund is at the 12% mark for the past few years.

 

Calculating Simple and Effective Interest Rate

Funding Societies Effective Interest Rate
Simple vs Effective Interest Rate

 

From the example, interest returns of RM10,000 for an RM100,000 investment opportunity (effective investment exposure of RM55,000) gives you an effective return as high as 18% (RM10,000 / RM55000).

The monthly repayments help reduce your risk exposure every month while increasing your investment returns. Best of all, if you choose to reinvest the monthly repayments you receive, you’ll compound and achieve even higher returns.

The folks at Funding Societies have a handy explanation for simple vs effective interest rates. The effective interest rate comes in handy when you want to compare your investments vs other choices in the market.

Default and Diversification

Most of you are worried about the risk involved when lending your hard-earned money to businesses you know almost nothing about. And you should be.

However, you’d be happy to know that the regional default rate as of November 2018 is at 1.02%.  Regional meaning Malaysia, Indonesia and Singapore.

Even more good news, the default rate in Malaysia is 3 out of 300 loans. That is 1.0%. With that kind of risk and return rates, I hope you’ll be able to make a more informed decision.

I do expect the default rate to increase in the near future as more businesses seek funding through the P2P network. As for me personally, I’ve yet to have a loan default in my portfolio.

Defaults are normal in the P2P lending industry so the key to success for us as investors is to DIVERSIFY.  The loans from Funding Societies give your returns anywhere from 10% to 16%.

I personally use the Auto Investment Bot provided by Funding Societies Malaysia.

I set my parameters as follows:

  • RM300;
  • A minimum investment period of 1 month;
  • A maximum investment period of 24 months;
  • At least 12% simple interest rate; and
  • At most 18% simple interest rate.

Signing Up – RM50 BONUS

Signing up to be invest is a breeze. Just head over to Funding Societies, and all you need is your IC / passport number, an email, and your mobile number.

Additionally, you’ll receive a bonus RM50 when you sign up with my code j1mwa37p

The terms? You’ll just have to invest a collective amount of RM1,000.

End.

I’ve been using Funding Societies for close to a year now and that 13.15% return is real. If you’re able to stomach that minuscule default rate they have right now, I think this would make a good investment alternative.

Again, thank you, everyone, for using my code upon registration.

I’ve gotten messages of concern from many of you advising against posting my referral bonus. But my aim is to always be as transparent as I can. I’m not recommending P2P for the referral fees.