Funding Societies is one of Malaysia’s leading peer-to-peer (P2P) financing platforms, allowing retail investors like you and me to fund small and medium enterprises (SMEs) in exchange for potential returns.
If you’ve ever wondered whether P2P lending is worth it, this review will break down how it works, what to expect, and my personal experience after using the platform for nearly four years.
How Does P2P Financing Investment Work?
P2P financing is a method where businesses seek funding from individual investors instead of banks. As an investor, you lend money to businesses, and they repay you with interest over a set tenure.
Here’s a simple breakdown:
- Businesses apply for financing on Funding Societies.
- Funding Societies assesses the business’s creditworthiness and assigns a risk rating.
- Investors (like us) fund the business’s loan in exchange for monthly repayments + interest.
- If the business repays as agreed, you earn passive income. However, if they default, you risk losing part or all of your investment.
P2P financing might sound like business loans from banks, and in essence, it is—except instead of financial institutions providing the funds, everyday investors do. The returns vary depending on the investment type, duration, and risk level.
Key Metrics
When you invest in P2P financing, you’ll come across several terms that might be confusing at first. Here’s a simplified guide to key metrics in your Funding Societies portfolio:
Total Deposits – The total money you’ve added to your account.
Total Invested – The amount you’ve invested in various financing opportunities.
Annualized Portfolio Performance – Your average return per year, factoring in defaults.
Total Income – All the returns, including interest and bonuses.
Principal Defaulted – The amount lost due to businesses failing to repay their financing.
Expected Payments This Month – The amount you’re expected to receive from repayments.
Outstanding Principal (Exposure) – The total amount still invested in active financing.
These figures help you track how well your investments are performing and assess whether P2P lending is a profitable strategy for you.
Investment Options on Funding Societies
Funding Societies Malaysia offers different types of financing products, including:
- Business Term Financing – Provides SMEs with capital for growth and expansion.
- Accounts Receivable Financing – Short-term financing based on unpaid invoices.
- Accounts Payable Financing – Helps SMEs manage supplier payments.
- Guaranteed Investment Note (GIN) – A lower-risk option where Funding Societies guarantees part of your investment.
Each option comes with different risk levels and return rates, so it’s crucial to research before investing.
My Personal Experience with Funding Societies
I started investing in Funding Societies on March 22, 2021, as part of my experiment with different asset classes like crypto and P2P financing. Here’s what happened:
- I made 8 investments in total, but all of them have matured or defaulted—currently, I have 0 ongoing investments.
- My annualized portfolio performance (p.a.) is 1.34%, which is lower than what I expected for a P2P platform.
- RM83.35 of my invested principal is defaulted and categorized under “Low or No Recovery,” meaning it’s unlikely I will get this money back.
- No expected payments this month (RM0.00)—this suggests that I’m no longer receiving repayments or interest from past investments.
- My expected returns are RM94.23, but the defaults significantly impact my actual returns.
- RM210.86 is due unpaid this month, which likely represents repayments that businesses have failed to meet.
What I Like About Funding Societies
User-friendly platform – The app is clean, and all the important information is displayed on the dashboard.
Easy to invest – Each investment note includes a factsheet detailing risk, tenure, and expected returns.
Auto-invest feature – Helps automate investments based on set criteria (though I had issues using it recently).
What I Don’t Like About Funding Societies
Limited investment opportunities – Sometimes, only one or two notes are available, making it hard to diversify.
Not liquid – Once invested, you cannot cash out early. You must wait for repayments.
High default risk – One of my investments defaulted, impacting my overall portfolio.
Key Takeaways from My Experience with Funding Societies:
High Default Risk – RM83.35 of my investments are now categorized as “Low or No Recovery,” reinforcing that P2P lending has a real risk of losing money.
Idle Funds and No Liquidity – Since I haven’t reinvested funds, my money is sitting idle in the account. Also, once invested, you can’t withdraw early, unlike stocks or crypto.
Lower-than-Expected Returns – My 1.34% p.a. return is lower than even a fixed deposit (~3-4% in Malaysia). After factoring in defaults, my actual returns might be negative.
No More Investments for Now – Given my experience, I have not reinvested in new notes, and I’m unsure if I will continue using Funding Societies in the future.
Conclusion
Funding Societies can be a good option if you:
- Are comfortable with higher risks in exchange for potential returns.
- Understand that defaults are a part of P2P lending.
- Don’t need immediate liquidity (since funds are locked in until repayment).
However, if you prefer low-risk, stable investments, P2P financing may not be the best fit. My personal experience was underwhelming, with a low 1.34% ROI, high default risks, and limited available investments.
If you’re interested in trying Funding Societies, start with a small amount, diversify, and use auto-invest to avoid idle funds.
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Have you tried P2P investing before? Share your experience in the comments! 🚀
