More signs that crowdfunding is going mainstream quickly. MAS, the Singapore regulator, has issued licenses to two crowdfunding platforms, MoolahSense and Funding Societies, to offer peer-to-peer lending activities to retail investors. Retail participation is a big positive development because it exposes the masses to a new form of investing, speeds up the learning curve and strengthens the ecosystem. In Malaysia, the Securities Commission has given the nod to six peer-to-peer platforms, which are expected to turn operational next year.
MoolahSense brings back the crowd!
MoolahSense has emerged ahead of the pack in clinching the first full Capital Markets Service License to offer peer-to-peer lending to retail investors. Funding Societies was also awarded an in-principle approval and plans to offer p2p loans to retail investors in 1Q2017.
The earlier CMS licenses issued to crowdfunding platforms such Capbridge, Crowdo and FundedHere were for crowdfunding activities by accredited investors. In Singapore, accredited investors refer to individuals with at least S$2m in personal assets or earning $300k in annual income. In other words, this isn’t really crowdfunding because the wealthy investors are just a small segment of Singapore’s total population.
In contrast, the CMS licenses issued to MoolahSense and Funding Societies allow it to offer peer-to-peer lending activities to the full spectrum of investors – both retail and accredited. This brings back the spirit of crowdfunding where the average retail investor can put up small amount of money to back businesses or projects.
Retail participation speeds up the learning curve
MAS has always been quite edgy about retail participation in crowdfunding. It is a risky new area, no doubt about it. MAS is worried about investors who may not fully understand the risks they are undertaking and losing their savings in this alternative forms of investments. Also, the Lehman mini-bonds episode was a painful experience when angry investors petitioned the government against alleged misrepresentation by bankers.
But retail participation is the right move. Firstly, total funding is larger because more investors can participate. This means that there is more money available to support SMEs or other businesses. Secondly and more importantly, all industry participants – the investors, businesses, platforms and regulators – can learn from each other so the eco-system can emerge stronger and better.
Take the recent p2p default cases as examples. Some failed due to declining business. Some had dubious business models. And a small number appeared to be outright frauds. When retail investors are involved, such news get published and everybody learns. Investors learn that defaults inevitably happen and the smarter approach is to have a diversified portfolio. Errant borrowers and platforms will quickly learn that they will be held accountable if they engage in questionable actions. Also, there will be robust discussion and collaboration on how to improve the eco-system. Everyone wins in the long run. This will not be possible if crowdfunding is restricted only to accredited investors.
Malaysia’s p2p landscape ready to take off
Securities Commission (SC), the Malaysia regulator, has given awarded licenses to six peer-to-peer financing platforms from more than 50 applicants. The approved platforms are: B2B FinPal, Ethis Kapital (sister company of KapitalBoost), FundedByMe Malaysia, ManagePay Services, Modalku Ventures (sister company of Funding Societies), and Peoplelender. They are expected to be operational in 2017 and widen the funding avenues for SMEs.
The SC is also targets to introduce Digital Investment Service framework to allow the licenses to offer automated discretionary portfolio management services which is an effective and convenient channel for investors to grow their wealth.