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GOAL: To understand terminologies used in all p2P lending platforms in Malaysia as well as its basic concepts & flow
Your business is in dire need of 1 million next month but 2 million Ringgit worth of payments are not coming in for another 2 to 3 months. What do you do when you already ran out of banks, families, friends, and fools?
Well, since you are here, the answer is…
“You can visit any of the licensed crowdfunding platforms to raise funds. All you have to do is click request finance and get your investment notes hosted by the platform as an issuer.”
It’s not as bad as it sounds Jackie but, these sections are a little dry, so please stay with me:-)
The regulator (Malaysian securities commission) requires all licensed operators to use specific terminologies on their platforms. Let’s discuss the major ones below
1. ISSUERS a.k.a the “borrowers” are the companies looking for money. In this case – to raise funds. They are known as ISSUERS because they publicly issue INVESTMENT NOTES to the INVESTORS through a licensed P2P platform…They look like this.
If you are a Sdn Bhd or any other types of privately held Malaysian registered companies, you can be an ISSUER and you can raise funds. However, you can’t do so if you are a public listed company or a private company that is 100% owned by a public listed company.
In my opinion, having personally seen high default rates with P2P platforms in Indonesia, these restrictions in Malaysia is a very good move by our regulator as means to reduce bad actors and maintain the reputation of this fledgling industry.
2. INVESTMENT NOTE is a legally binding document containing information about the ISSUER’s business, how much money they need, what interest they pay to their INVESTORS, when will they make those repayments, etc.
If you are familiar with Unit Trust investments, an INVESTMENT NOTE is equivalent to a fund factsheet. Here’s an actual INVESTMENT NOTE from one of the licensed platform.
3. INVESTOR is perhaps the most straightforward of the four. That’s you, me, our friends, uncles, aunties, cousins, colleagues, neighbors, Koperasi, private and public listed companies, associations, etc. Imagine a few million of us with 1000 Ringgit each! That would represent billions in Ringgit for our struggling SMEs, especially in the Covid-19 economy. So, to recap – only companies are allowed to “borrow” or raise funds, but EVERYONE is allowed to INVEST.
4. HOST is where the P2P platform post the Issuer’s INVESTMENT NOTES to registered INVESTORS. This concept is similar to online shopping. You start by searching and selecting items you are interested in; you make your payments; you receive your order confirmation, and wait for your orders to be shipped.
Similarly, INVESTORS perform a search, select INVESTMENT NOTES they like, make “payments” by typing in the amount they want to invest, click “submit”, and wait for the INVESTMENT NOTES to mature.
After maturity, the platform collects and send your investments + interest back into your eWallet where your choices are either to send them back to your registered bank account or INVEST in another round of INVESTMENT NOTES