P2P lending platforms in Malaysia: What do we know?

Area of Science:

• Financial Technology (FinTech)
• Peer-to-Peer (P2P) Lending
• Investment Risk Analysis

Background:

• Financial Technology (FinTech) has led to the rise of Peer-to-Peer (P2P) lending platforms in Malaysia since 2016, regulated by the Securities Commission.
• P2P lending offers individual investors higher potential returns than traditional lenders but also entails increased default risks from borrowers.
• Understanding potential risk exposures is crucial for individual investors to make informed decisions on P2P lending platforms.

Purpose of the Study:

• To explore potential risk exposures faced by individual investors on licensed P2P lending platforms in Malaysia.
• To analyze the relationship between interest rates and key risk factors in the Malaysian P2P lending market.

Main Methods:

• Manual data collection from nine P2P lending platforms over a five-month period.
• Examination of relationships between interest rates and risk factors: credit rating, industry, business stage, loan purpose, and loan duration.

Main Results:

• Significant variations in interest rates were observed for loans with similar credit ratings, loan purposes, and business stages.
• Shorter loan durations were associated with higher interest rates compared to longer durations.
• Loans from companies within the same industry generally exhibited similar interest rates.

Conclusions:

• This study provides novel insights into Malaysia's P2P lending landscape using firsthand-collected data.
• Findings on the interplay between interest rates and risk factors (credit rating, industry, business stage, loan purpose, loan duration) are valuable for investors.
• The results empower individual investors to better assess risks and opportunities within Malaysian P2P lending platforms.