By David Tuckwell on Friday 26 May 2017
Singapore is known for making fintech work
Singapore's top invoice financer has plans to bring in European investors.
Singaporean marketplace lender Capital Match has hit S$40 million in loans funded and has started rolling out infrastructure to onboard European investors.
The company, the largest marketplace lender in Southeast Asia, is hoping Singapore’s strong fintech scene and the chance to diversify into Singaporean dollars will lure foreign investors.
“The traditional SME lending sector in Singapore is highly inefficient and oligopolistic: at present the largest four banks account for 80 percent of SME Singaporean banking relationships,” Tobias Fischer, Director of Corporate Development, told AltFi.
“[But] banks have been more strict in their lending policies so there has been huge demand on the borrowing side.
“As a result [SME lending] is incredibly profitable, so there are great opportunities for investors to achieve excess returns.”
Founded in 2015, the company secured financing from Dymon Asia Ventures, a major Singaporean VC firm, in early 2016, which allowed it to scale.
While offering a number of asset classes, Capital Match focusses on invoice financing because it has proved a more profitable market.
SMEs using its platform to borrow money can be from any industry but mostly come from construction and manpower supply. The Singaporean SME lending space is different from the US and UK because it is not fragmented, Mr Fischer says, allowing the company to be “industry agnostic”—unlike its British and American peers.
The interest rates Capital Match charges borrowers are typically between 15-35 percent per annum. Loans are, on average, two months in duration.
There have been defaults - but only a couple. In order to prevent them, borrowers are required to disclose invoices on Capital Match’s website and, in some cases, procure trade credit insurance.
The company profits by taking a 20 percent share of the interest earned by investors. By taking a slice of the interest earned, Mr Fischer says, Capital Match is incentivised “only to underwrite high credit quality invoices. We would not be paid if there is no successful repayment.”
Despite its location, the company has no designs to expand into Australia. It also has no plans to move into China because, like other Singaporean and Japanese financial institutions, it believes there is too much fraud.
In any event, there is plenty of opportunity in Southeast Asia.
“We’ve seen huge interest from Singaporean investors… [They are] typically active in real estate and they see this as a non-correlated asset class compared to their existing portfolio. Then if you look into yields that we’re currently offering to investors… it’s quite a decent return for them.”