Crowdfunding flourishes in Malaysia as banks reject loan applications

Equity crowdfunding and P2P platforms have raised $84m for small businesses so far.

Bloomberg reports that the crowdfunding model is gradually gaining steam in Malaysia, especially as a financing alternative for property purchases, with reluctant banks holding back funds for loans.

Equity crowdfunding and peer-to-peer platforms, which let consumers bypass banks and connect directly with investors, have raised $84m (MYR350m) for small businesses so far, with more than half of the 11,261 investors being younger than 35 years old, data from the Securities Commission (SC) show.

The government hopes that fintech platforms can help plug the imbalance that characterises the property market which is plagued by oversupply but grapple with affordability issues especially as banks may be turning more reticent as loans disbursed to buy residential property shrunk 5% Yoy in Q1.

Also read: Looming loan slowdown threatens Malaysian banks' 2019 earnings

New loan applications shrunk 6% in March with business and household loan applications falling by 8.5% and 3.9% respectively, data from UOB Kay Hian show. The downward trend is set to persist with household loan growth tipped to fall to 5.1% by end-2019 from 5.6% in the previous year, according to projections from Maybank. Amidst persistent weakness in the consumer segment, analysts expect corporate lending to sustain the growth of systemwide loans in Malaysia.

“I hope when I keep publicly asking the banks to lend more, they do not have a counter reaction by restricting loan lending,” finance minister Lim Guan Eng told Bloomberg. “This is something that the government will not be happy about,” adding that he is looking into whether it can roll out incentives for fintech as soon as in the 2020 state budget.

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