Last week, I went to the InvestSmart Fest 2019 at Mid Valley. In the middle section, there are a lot of Peer-to-Peer (P2P) Financing and Equity Crowdfunding (ECF) platforms which can be seen in the photo below:
As of now, I’m only using Luno for Crytocurrency (Bitcoin and Ethereum) and Funding Societies. If you do not have Luno or Funding Societies account yet, you can use my referral code so we both get free money:
Luno: https://www.luno.com/en/invite/HM6XK
(You and I will get RM25 worth of Bitcoin each when you sign up using the link above or using referral code HM6XK and when you deposit money into your Luno wallet and buy or sell Bitcoin worth RM 250)
Funding Societies: http://promo.fundingsocieties.com.my/referral-program/?r=jz8mxshj
(You and I will get RM30 each when you sign up using the link above or using referral code jz8mxshj and invest a total of RM1000)
As there are not many reviews on the P2P or ECF platforms, I collected their brochures to do comparison. The next day after the event, I saw the Smart Investor magazine mentioned about alternative investments which includes P2P and ECF so I bought it so I can do more research on it.
What are P2P and ECF?
The common investment options are Fixed Deposit (FD), Unit Trust (UT), and Stocks/Shares due to their low entry level and familiarity as most of us have heard of the options. However, in recent years, P2P and ECF started gaining traction. In layman term, P2P financing allows investors to lend their money to businesses to earn interest. On the other hand, ECF allows investors to put money into a business to gain shares and/or dividends. Both P2P and ECF allows businesses to raise capital or business funds.
The differences between P2P and ECF is nicely summarised in the table below by Focus Malaysia:
Pros and cons of P2P and ECF
All investment options have their pros and cons. Therefore, depending on your investment risk appetite, P2P and ECF may or may not be your cup of tea.
Pros
- High return – the returns can go up to as high as 18% per annum (p.a.)
- Easy to apply and monitor – some of the platforms have mobile apps for easy application and monitoring
- Easy to invest – thanks to technology, certain platforms have auto-invest functions where you can put in filters and it will do the job for you
- Low entry point – you can invest from as low as RM50
- Diversification – as there are a lot of businesses to invest in, you can diversity into different industries to mitigate your investment risk
Cons
- High risk – if the business that you invest in fails, you can lose your capital
- Illiquid – once your money is borrowed to the businesses, you have to wait until the end of the loan tenure to get the full capital + interests
- Lack of information – compared to companies listed in the stock market, you only have access to the factsheet or the info that is provided by the P2P or ECF platform
3 Tips for choosing P2P and ECF platforms
After going through the pros and cons of P2P and ECF, if you would still want to include it in your investment portfolio, do consider the few tips below to choose the right platform:
- Information of the financial platform and services – the more information provided the better ie how are investors’ fund being handled, what happens in case there is insolvency, the info included for background business check etc. These usually can be found in each platforms’ FAQ
- Track record – check on the default rate, the lower the better
- Registered under SCM (Securities Commission Malaysia) – you can check the list here
As of date, there are 10 ECF platforms and 11 P2P platforms registered under SCM:
| Platforms | Mobile app | Auto-invest function | Entry capital | Fee | Default rate | Remarks |
|---|---|---|---|---|---|---|
| 1337 Ventures | No | No | N/A | N/A | N/A | Need to sign up to view more details on the companies |
| Ata Plus | No | No | N/A | N/A | N/A | Can pay via debit or credit card |
| Crowdo | Yes | No | N/A | N/A | 1.82% | The P2P is for Indonesia and Singapore investors |
| Ethis | No | No | N/A | N/A | N/A | Islamic ECF platform |
| Eureeca SEA | No | No | N/A | N/A | N/A | A lot of international businesses. You can join their Investor Club for more benefits |
| FundedByMe | No | No | N/A | 1.9% of amount invested for card transaction fee and 10 Euro for standard platform fee | N/A | Mostly international businesses |
| Fundnel | No | No | N/A | N/A | N/A | SpaceX and CapBay was funded through this platform |
| MyStartr | No | No | RM500 | N/A | N/A | There are reward based projects as well |
| pitchIN | No | No | N/A | N/A | N/A | The platform separated the investments into different categories for easier browsing |
| Crowd Plus | No | No | RM100 | N/A | No | Fei Fei Crab was funded via this platform |
- Bay Smart Capital Ventures Sdn Bhd
- B2B Finpal Sdn Bhd
- Capsphere Services Sdn Bhd
- Crowd Sense Sdn Bhd
- Ethis Kapital Sdn Bhd
- FBM Crowdtech Sdn Bhd
- MicroLEAP PLT
- Modalku Ventures Sdn Bhd
- Moneysave (M) Sdn Bhd
- Peoplender Sdn Bhd
- QuicKash Malaysia Sdn Bhd
Comparison of the P2P platforms:
| Platforms | Mobile app | Auto-invest function | Entry capital | Fee | Default Rate | Remarks |
|---|---|---|---|---|---|---|
| Capital Bay | Yes | Yes | RM10000 | 10-30% of return | 0% | High entry capital |
| B2B Finpal | Yes | Yes | RM1000 | 30% of interest collected | 2.94% | Has daily updates via WhatsApp |
| Capsphere | No | No | RM200 | 1-2% of return | N/A | Asset-based P2P platform |
| Crowd Sense | No | No | RM1000 | 20% for investments less than 12 months; for investments more than 12 months, there will be 2% charge on principle only | N/A | Can't find any info to it |
| Nusa Kapital | No | No | RM500 | 10% of return | N/A | Shariah compliant |
| Alixco | No | No | RM500 | 1% of total repayment | N/A | Expected return of 8-16% p.a. |
| MicroLEAP | No | Yes | RM50 | Arrangement fees of 1-2% | N/A | They offer Islamic Investment Notes as well |
| Funding Societies | Yes | Yes | RM1000 | Business term - 2% p.a. of each repayment Accounts receivable - 15% of interest repayment Accounts payable - up to 30% on interest repayment | 1.39% | Up to return of 14% p.a. |
| Moneysave | Yes | No | RM5 | Up to 15% of return | N/A | There are risk reduction items that will reduce the risk grading of a note |
| Fundaztic | Yes | Yes | RM50 RM2000 for auto-invest function | Transaction fee - RM0-RM3 Platform management fee - 1% of monthly repayments | 2.73% | There is a feature that protects your capital up to RM30k if you invest at least 100 notes |
| QuicKash | Yes | No | RM100 | Service fee of 1.35-1.5% for each repayment | 1.3% | Can sign-up via their app only |
Conclusion
Based on the 2 tables above, ECF platforms do not have mobile app (except Crowdo because it has P2P as well) and no auto-invest function because interested investors will have to study the businesses well before investing for shares or dividends. In addition, most of the ECF platforms will require you to sign up with them before you can see more details of a company. Based on the ECF websites, Eureeca SEA and MyStartr have more active listings compared to the others. However, Eureeca SEA’s listings are usually international businesses while MyStartr’s listings are projects instead of businesses. For the full list of businesses, you have to join MyStartr’s Investor Club with annual fee of RM500 which will be converted as your investment fund but you will have to invest into 10 projects a year with a cumulative investment of RM5000.
I am more interested into P2P and will research on the platforms above. Then, I’ll share my reviews on them on the next post.
Have you tried any of the platforms above? Feel free to share us your experiences in the comments section.
