• Funding Societies reduced its operational costs and cash burn by 50% during the pandemic
• It managed to keep its default rate below 2% by focusing on selected industries and increased asset backed products
• The company has disbursed $1.5 billion loans to date although its annual growth rate of loans disbursed slowed in 2020

Funding Societies, a peer-to-peer (P2P) lending fintech that operates in Singapore, Malaysia, and Indonesia (as Modalku), focuses on meeting the short-term credit needs of small and medium enterprises (SMEs). The company began its operations in Thailand early this year. The challenges brought about by the COVID-19 pandemic forced the company to undertake several initiatives to manage its credit risks and operational efficiency. Kelvin Teo, Group CEO and co-founder of Funding Societies, explained, “In 2020, we reassessed our spending, re-negotiated costs with our vendors, became more prudent with our expenditures, and improved productivity. This helped to bring our cash burn down by about 50%”.  The company had raised Series C funding of $40 million in April 2020.

Increased credit risk during the pandemic

Financing needs of SMEs increased during the pandemic but so did the credit risks and non-performing loans (NPL). Investors’ risk appetite shrunk and lending companies were forced to narrow their risk assessment criteria and strategies.

Teo shared, “For new SME customers we tightened our credit assessment and lent only to industries that are performing well during the pandemic such as healthcare, transportation and medical supplies. We have reduced the tenor of our loans further and stepped up asset-backed products to mitigate pandemic-related risks. Our team engaged with existing SME customers early to understand their situation and strike the right balance between helping SMEs and protecting investors’ interest”.

Teo attributes his company�...

Categories:

Keywords:P2P, Credit Risk, NPL, Risk Management

• Funding Societies reduced its operational costs and cash burn by 50% during the pandemic
• It managed to keep its default rate below 2% by focusing on selected industries and increased asset backed products
• The company has disbursed $1.5 billion loans to date although its annual growth rate of loans disbursed slowed in 2020

Funding Societies, a peer-to-peer (P2P) lending fintech that operates in Singapore, Malaysia, and Indonesia (as Modalku), focuses on meeting the short-term credit needs of small and medium enterprises (SMEs). The company began its operations in Thailand early this year. The challenges brought about by the COVID-19 pandemic forced the company to undertake several initiatives to manage its credit risks and operational efficiency. Kelvin Teo, Group CEO and co-founder of Funding Societies, explained, “In 2020, we reassessed our spending, re-negotiated costs with our vendors, became more prudent with our expenditures, and improved productivity. This helped to bring our cash burn down by about 50%”.  The company had raised Series C funding of $40 million in April 2020.

Increased credit risk during the pandemic

Financing needs of SMEs increased during the pandemic but so did the credit risks and non-performing loans (NPL). Investors’ risk appetite shrunk and lending companies were forced to narrow their risk assessment criteria and strategies.

Teo shared, “For new SME customers we tightened our credit assessment and lent only to industries that are performing well during the pandemic such as healthcare, transportation and medical supplies. We have reduced the tenor of our loans further and stepped up asset-backed products to mitigate pandemic-related risks. Our team engaged with existing SME customers early to understand their situation and strike the right balance between helping SMEs and protecting investors’ interest”.

Teo attributes his company�...

Categories:

Keywords:P2P, Credit Risk, NPL, Risk Management