Investor: ‘I want higher returns from my investment.’
Businessman: ‘I need immediate cash to run my businesses.’

As I write, there is a new and vibrant platform that acts as a marketplace to connect SMEs that require financing and investors who are seeking for high yielding investment vehicles in Malaysia. The platform is commonly known as peer-to-peer (P2P) financing.

In 2016, the Securities Commission (SC) has announced the P2P financing’s regulatory framework and has approved six P2P operators in Malaysia. One of them is Funding Societies. Personally, I’ve explored its facilities, registered an account and began investing. Thus, I’ll be sharing my personal experience and what I know thus far about investing via Funding Societies.

Therefore, here are the seven things you need to know about Funding Societies before you invest.

#1: What’s Funding Societies?

Funding Societies was launched in February 2017 as the first P2P operator in Malaysia. Presently, it is also the largest P2P operator in our nation. Since its launch, Funding Societies has crowdfunded RM 310.8 million regionally (Malaysia, Singapore an Indonesia). For local SMEs in Malaysia as of December 2017, they had successfully funded RM18 million so far.

#2: What can Investors buy?

Investors can choose to invest in both or anyone of the two:

  • Business Term Financing
  • Invoice Financing

Business Term Financing allows investors to provide financing to SMEs for the purposes of working capital and capital expenditures over a short period of time. The duration ranges between 1 to 24 months. In return, the investors would profit from receiving interest payments from the respective SMEs.

Invoice Financing allows investors to buy over future receivables or invoices of SMEs at a discount. SMEs would benefit as they receive instant cash from the investors. In return, investors would profit from receiving interest income from the respective SMEs.

#3: How Much am I making?

Here is one of my investments in Funding Societies:

Funding Societies Investment Schedule
Funding Societies Investment Schedule

The details are as followed:

Investment (Principal) = RM 1,000.
Tenure = 12 months.
Simple Interest Rate per annum = 13% (before service fees)
Net Repayment = RM 1,107.44 (after service fee)
Net Interest Income = RM 107.44
Expected Net Returns on Investment (ROI) = 10.74%

Looking at the simple interest return of 10.74% might already be appealing, but the real effective compound return is way higher than that. If you’ve gone through one of my Time Value of Money webinars, you will be able to calculate the effective annual rate which is 19.26%.

However, there are risks involved. Let’s examine them.

#4: What is my Risk?

As I’m a financing provider (like a banker), I would face the risk of potential loan defaults and late payments. As at December 2017, Funding Societies has reported a default rate of 1.4%, which in my opinion is very good. This low default rate is based on the track record of their Singapore HQ. In their few months operation here in Malaysia, there is zero default so far.

Funding Societies provide a scorecard-based assessment of the SME’s creditworthiness. It is based on its business model, its financials, the directors’ CTOS and CCRIS scores, and its repayment behaviours.

Site Visits
In addition, Funding Societies may conduct site visits and interviews of directors of these SMEs to ensure that its portfolio of borrowers is of superior in quality.

Personally, I would screen through the potential borrowers by checking out their fact sheets before investing in them. The fact sheet contains:

The Financing Details
This includes the financing amount, simple interest rate, its purpose, documents obtained by Funding Societies and potential net returns from this investment.

The Company’s Summary
This includes the date of incorporation, the company’s business nature, its paid-up capital, number of employees, existing debt exposures, its financing records and repayment behaviour.

Directors’ Summary
This includes the duration of the directorship of a director in the company, his financing records and repayment behaviour, and any involvements in litigations.

The audited financial accounts and its financial ratios.

In addition, I would also diversify my investments to a number of borrowers so that my risk is well-spread out.

#5: How Much can I invest?

First and foremost, you may need to deposit RM 1,000 into your brand new account. From which, you can start investing with as little as RM 100. The maximum amount is capped at RM 50,000 per investment.

#6: How do I track my Portfolio?

I’m able to track my investment portfolio with ease in my account.

The Summary:

Funding Societies Portfolio Summary
Portfolio Summary

The Investment Details:

Funding Societies Investment Details
Investment Details

The Investment Repayment Schedule:

Funding Societies Investment Repayment Table
Investment Repayment Table

#7: How do I open my Account?

I find that signing up is relatively easy. For those of you who are interested, click on this link to start:
I want to Sign Up as an Investor in Funding Societies

Disclosure: It is my affiliate link. When you sign up using this link and invest RM1000 successfully, we will both be credited with extra RM30 for investment.

Happy Investing!

Quiz: How much do you know about Funding Societies?


Personal finance author and trainer

    34 replies to "7 Things You Need to Know about Funding Societies before You Invest"

    • SY


      I tried to calculate your effective annual return (19.26%) by assuming it’s compounded monthly, but I could not get your 19.26%. May I know what assumptions do you use in computing it?


      • Daryl

        Me too could not get 19.26%. I got 17.59%. Did you get the same?

        • KCLau

          How do you calculate the 17.59%?

          • Daryl

            Hi KC, first i back-calculated the service fee which comes up to around 17.39%. I will receive a monthly repayment of 92.28 (83.33 principal + 8.95 interest minus service fee). To calculate effective return, I then reinvest this 92.28 that i receive monthly using the same interest rate (i.e. the first 92.28 amounts to 103.89 by end of year, second 92.28 amounts to 102.8, and so on; final 92.28 stays at 92.28). 103.89, 102.8, …, and 92.28 sum up to 1175.8 and that’s how i got 17.58% as effective return. If i do not do this monthly reinvestment, i would be getting 1107.4 or 10.74%, just as you mentioned.

            • KCLau

              Well, you will need to use the formula of time value of money.

            • KCLau

              Using the method you describe, if you compound all the payment you receive with 30%, you will get the final answer as 30% too… (or whatever rate you use). So it is not the correct way to find out the actual rate.

            • Daryl

              No, if i use 30% i would get 43.45% effective (46.87% if continuous compounding). Regarding my previous answer of 17.58%, if i do continuous compounding, i would be getting 18.06%. Still not 19.26%.

            • KCLau

              How do you first derive the 17.58%?
              As you mentioned in the first comment “first i back-calculated the service fee which comes up to around 17.39%”

            • Daryl

              I calculated the total return to be 1175.8 (as i have described above) so the effective return (monthly compounding, not continuous) would be 175.8/1000 or 17.58%. 🙂

            • KCLau

              Hi Daryl, sorry that I still couldn’t understand how did you first come up with 17.58%?

    • Jeremy

      Hi, after invest. The status of my investment is ‘pending investment’, which mean I success my investment or? Thanks.

      • KCLau

        It means it is in progress.. not yet released to the borrower.

    • Benjamin

      May I ask if I have reached investment of the maximum capped RM50k, should I open a second account? Or Is there other similar p2p like funding societies?

    • Ang

      used ur referral link. thanks KC.

    • Steven

      How about other P2P companies like Finpal and Fundzatic ?

      Are you are able to compare them as well?

      Just to know if the borrower default, then how will be my investment eg. 1000?

    • Loh Hc

      Hi KC,

      Signed up using your affiliate link and successfully invested RM1000 and now RM1100 has been invested in the deals but RM50 is nowhere to be seen.

      Anyway, already asked them via live chat. Pending their reply.

    • Skye Grey

      Hi KC, I’m a foreigner residing in Singapore. I just would like to know if I can use your link to register to get the 50rm bonus? 🙂

      • KCLau

        I am not sure though. You will need to ask Funding Societies to confirm.

    • Jayden

      Hi, I’ve signed up about a week ago and my account just got verified after the payment was made, when would the RM50 referral fee be credited into my account?

    • CG

      registration just approved and noticed no more investment opportunities available, currently also only one ongoing investment deal right now.. curious if this still valid..

      • KCLau

        Now the supply of lenders is more than borrowers.

    • JC Tee


      As a beginner on investing, I have been reading few of your articles. Thanks for sharing, I’ll be using your link to sign up.

      Well done.

    • ny

      how about the defaults cases? how to resolve? please provide some example (if any).
      for Malaysian, is the interest profit subject to tax? or GST? or income tax?

      • KCLau

        So far, there is no default yet for the companies funded through FS Malaysia.

        The interest profit is taxable. And you need to declare to IRB using the yearly statement FS email to you.

        • Tan

          Is it then really worth it if the interest profit is being taxed?

          • KCLau

            After taxed, it is still giving the rate of return you require?
            It differs for each person, depending on their tax bracket and also the expected return rate.

            • Ys

              I think the tax is the deal breaker. Here is my reasoning : Assuming u get net 9%+ interest. If you tax bracket is 20%+, that will leave u with only 7%+. Better put it in EPF or ASM etc which give almost similar return but is virtually risk free.

    • fezal

      can i withdraw all my money if i didnt interested anymore in investing.

      • KCLau

        You can withdraw the balance anytime. But for the sum that participated in deal, you will need to wait for the payback period to get it back.

    • mariam

      Hi KCLau, thanks for your post. i would be registering using your link.
      Just want to ask, do you know if foreigners are allowed to invest as well.

      • KCLau

        Try opening an account with them. No harm trying. I think foreigners are allowed. Just got withholding tax.

    • ayuni

      wow thank you so much kc for this sharing!

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