Capital Match, a new peer-to-business platform, has launched in Singapore.
The company’s mission is to provide business borrowers with the next best interest rates after banks and to give investors access to an attractive yield with a low investment entry amount.
The platform has already completed three loans totaling S$300,000 since its first listing in February 2015. And it has a fourth loan on the platform asking for S$200,000.
The peer-to-peer lending industry is still in its infancy in Singapore but there is still a great need for it. As in many other countries, SMEs contribute a vast proportion of the country’s economy and yet have limited access to credit where banks tend to be conservative lenders and apart from risk considerations, strict capital requirements and lending limits for certain industries also mean it may not make commercial sense for banks to make these small business loans.
Capital Match co-founder Pawel Kuznicki explained:
“The SMEs we speak to tell us it is increasingly difficult for them to get loans from banks. P2P lending will provide a much needed source of alternative financing for our local SMEs. We chose to start our operations in Singapore because of the robust regulatory and legal framework, but we have ambitions to grow regionally”.
Typical interest rates on the platform are 1.5-2.5% per month, which is more affordable than other financing alternatives. The platform will accept applications from Singapore businesses in any sector, where loan sizes typically range from S$50,000 to S$200,000 with a 3-12 month tenure.
Although consumers also have a need for borrowing, Capital Match’s founders chose to focus on business borrowers because of the strict moneylending laws and licensing requirements surrounding consumer borrowing. However, although strict, the regulatory environment in Singapore is keeping pace with market developments. Earlier this year, the Monetary Authority of Singapore, the country’s regulator, issued a consultation paper on proposals to facilitate equity crowdfunding.
The platform has successfully attracted an investor base who are looking to add fixed income products to their portfolio and diversify away from asset classes such as equities and real estate. Anyone based in Singapore with a Singapore bank account can start investing with as little as S$1,000.
The platform performs a credit assessment on each borrower and an interest rate is assigned to each loan that is approved for listing. Capital Match does not operate an auction-based model as it prefers a risk-based approach to pricing credit risk. This also avoids distortions from a “hot listing” that may result in unrealistically low interest rates. The investors on the platform also like the certainty of knowing the exact interest rate they will be receiving when they invest.
Each investor has an online account in which they can view available loan listings, make investments and monitor their loan book.
Dr. Bailly, who is the chief architect of the online platform explained:
“Ease of use and security are our top priorities.”
The team behind Capital Match represents a strong combination of experiences across management consulting, Internet commerce, software engineering, investment banking and credit risk assessment. The company’s three co-founders are Pawel Kuznicki, Kevin Lim and Dr. Arnaud Bailly. Kuznicki is an Internet executive and ex-management consultant previously with Rocket Internet and McKinsey. Lim is an ex-FIG investment banker previously with JP Morgan, Macquarie Capital and Standard Chartered. Dr. Bailly is a software engineer previously with Murex. The company has also hired Low Yen Chew as senior credit officer. Low brings with her years of experience in SME credit review and audit having previously worked with a local financing company.
Credit assessment is an important aspect to the business model and the platform makes a comprehensive analysis of each loan application with a documentation list similar to a bank’s, for example, management accounts, bank statements, tax notifications and other evidence of the business’ operations and cash flows. The platform also has in place a partnership with DP Information Group, which is part of the Experian Group, to obtain an independent credit rating for the loan applicant.
The platform is focusing on unsecured lending currently and takes a personal guarantee from the company’s directors as added security. In the future the platform will look to leverage the data it has accumulated and automate more of the process.
P2P lending is still a very new concept in Singapore and Capital Match is making a huge effort to increase public awareness. To reach out to investors, the platform has taken part in investor conferences and holds weekly information sessions. To reach out to borrowers, the platform works with finance brokers and has a partnership with the largest SME consultancy in Singapore to introduce borrowers to the platform.
The platform is also looking to strike a partnership with local banks, similar to the partnership Funding Circle has with RBS and Santander. Capital Match sees a broader purpose in helping borrowers build a credit rating so they can get back into the system.
“The banks do not see P2P lending platforms as competition, but rather filling a gap in the banking ecosystem. We want to help SMEs build their credit history and eventually be able to go back to their bank for a loan.”