Singapore’s largest bank DBS has today announced partnerships with two local peer-to-peer lending platforms, Funding Societies and MoolahSense. The aim of the agreement is to expand the reach of funding sources available to small businesses through a kind of referral scheme between the three entities. DBS is obliged to refer some of the smaller businesses that it is unable service to the Funding Societies and MoolahSense platforms.
In exchange, both platforms will refer borrowers – who have completed two successful rounds of fundraising for larger commercial loans and other financial solutions – to DBS. The flow of information between the bank and platforms will start only when full authorization is given in advance by each borrower. Joyce Tee, Group Head of SME Banking at DBS, offered comment:
“Headquartered in Singapore, DBS is an influential financial services group in Asia, with a growing presence in Greater China, Southeast Asia and South Asia. DBS’ partnership with Funding Societies and MoolahSense is a good example of how traditional and alternative finance providers can work together to support the funding needs of small businesses,”
Both MoolahSense and Funding Societies are peer-to-peer lending platforms, both focused on offering funding opportunities to local small businesses.
MoolahSense claims that investors can earn up to 21% per annum by investing through the platform. The minimum investment amount is S$1,000 and increases in subsequent increments of S$1,000. All the notes are unsecured and there is no physical collateral, even though shareholders or partners of the business requiring funds must provide personal guarantees on the notes.
Launched in 2014 by Kelvin Teo and Reynold Wijaya, Funding Societies has a minimum investment amount of as low as S$100, with no upper limit. To apply for loans, small businesses need to satisfy several requirements, such as being incorporated in Singapore, with Singaporean or Permanent Resident Director(s) of at least 30% shareholding, they must have been in business for at least 1 year and have an annual turnover of at least $300,000. Loan amounts range from S$20,000 to S$200,000 and interest rates from 9% to 14% per annum on a simple interest basis.
The DBS deal could represent a huge opportunity – not only for the three companies involved, but also for local borrowers. Small and medium enterprises are critical to the economic development of Southeast Asian countries, as Kelvin – who is also founder of Modalku, an Indonesian online lender – told us during a recent interview.
Across five specific countries – Indonesia, Malaysia, Philippines, Singapore and Thailand – SMEs are said to contribute between 30% and 60% of gross domestic product (GDP) and employ between 60% and 90% of the total workforce. However, less than 60% of SMEs in the five countries have access to bank loans and approximately 50% of the SMEs are underserved by financial institutions.