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Alternative Investments

How Peer-To-Peer Lending Supports Financial Inclusion

Financial inclusion is increasingly becoming a buzzword in the finance arena. While crucial in setting a strong foundation for development, the Southeast Asian (SEA) region and the world still has a lot of room for improvement. This is where Peer-to-Peer (P2P) lending can step in to steer the money lending economy in the right direction.

Why is financial inclusion important?

Financial inclusion refers to people and businesses having access to affordable and useful financial products and services, delivered in a sustainable manner. This can include access to transactions, payments, credit, savings, and insurance, just to name a few.

A crucial foundation

Financial inclusion is important as it contributes directly to the ability of communities to develop and grow. It equips people with the tools to manage their wealth by having savings and enabling the allocation of resources to various aspects of their lives such as health, education, and business. According to the American Economic Review, financial inclusion can aid in the reduction of poverty through an increase of one’s income potential and asset-building capabilities. Financial inclusion also acts as a safety net to let companies survive financial emergencies through business loans.

The state of financial inclusion in SEA

Despite the importance of financial inclusion, many individuals and businesses still lack access to quality financial services. Global Findex Database found that 1.7 billion people worldwide do not have access to basic financial services, like a bank account. Deloitte reported that less than 60% of Small Medium Enterprises (SMEs) in Indonesia, Malaysia, Philippines, Singapore and Thailand have access to bank loans as a means of financing. Shockingly, the region around us continues to use personal funds as a dominant source, particularly in Indonesia.

The reality is that SMEs’ financial requirements are more often than not too large for microfinance, yet too small to be effectively served by corporate banking models. As such, there are many underserved companies with poor access to mainstream financial services and need to rely heavily on alternative financial services.

How does P2P lending support financial inclusion?

The presence of financial exclusion reveals a potential market for lenders. In particular, P2P lending can help address the issue of accessibility while providing an alternative form of investment.

Accessibility upgrade

P2P lending brings lenders and borrowers in direct contact through a common platform. By skipping traditional financial institutions through a convenient digital platform, the P2P lender is able to enhance access to much-needed working capital. Lenders and borrowers are not bogged down with the same degree of bureaucracy and regulation imposed by traditional credit providers, and other measures of assessing creditworthiness are in place. Instead of waiting for a week to process loan applications, a more immediate relief can be provided through P2P lending for business emergencies in the form of SME loans, bridge loans, invoice financing, and more.

Viable investment opportunity

On top of the improved access to funds, P2P lending also adds more options to the pool of investment types available. As opposed to a large starting capital of $10,000, P2P lending allows easy entry with affordable options starting from $20. New and seasoned investors alike can look forward to diversifying their portfolio through this form of alternative investment.

In this digital age, there are lesser excuses for financial inclusion to remain problematic. Banks and Fintech businesses need to ensure that the underserved community is not left behind. P2P lending has the potential to reinvent the funding sphere.

Read Also: Step-By-Step Guide To Investing With Funding Societies In 2019

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Investing

Step-By-Step Guide To Investing With Funding Societies In 2019

Are you interested to start investing in SMEs with us but have no idea how to start? We have created a step-by-step guide to facilitate your sign up process.

Step 1: Create your profile on our sign up page.

Step 2: Upload a scanned copy of the relevant documents for investor application

Singapore Citizen and Permanent Resident Foreigner residing locally or overseas
NRIC Passport + Proof of Residential Address*

What can be used as Proof of Residential Address?

Utility bills, credit card/bank statement, letter from government bodies or landline telephone bill which are not older than 3 months can be used as Proof of Residential Address. Kindly note that bills for mobile plans are not accepted.

For non-Singaporeans residing overseas holding an overseas bank account, you may also upload your Bank Statement to serve as your Proof of Residential Address

Step 3: Fill up a quick 5 minutes Subscription Agreement

You will be directed to fill up a quick 5-minute form relating to your personal information and your source of wealth.

Complete a General Questionaire about your Investment Profile

Fill in your bank details

Step 4: E-sign the Subscription Agreement

We will then email a Subscription Agreement by the next business day for e-signing.Ensure that all details are correct before electronically signing the Subscription Agreement. If any changes are required, reach out to us to amend the agreement immediately. Please note that your documents can only be legally reviewed once you have signed the agreement. Just follow the yellow arrow which will direct you to the 4 fields that you have to fill up!

Step 5: Transfer a minimum of S$500 to our escrow account

Once the due diligence process by our escrow agency has been completed, transfer a minimum of S$500 to our escrow account (account details will be provided on the Deposit page).

Remember to upload the transaction receipt, which should show your account number, our escrow account number and the amount transferred.

Read More: What Is An Escrow? How Does It Work?

Note: The requirement to transfer a minimum of S$500 only applies for the initial deposit. For subsequent transfers, there is no minimum amount required.

Step 6: Start investing with us

We will confirm the deposit and activate your account by the next business day. When your deposit has been confirmed, you can begin investing with us. To invest and monitor your portfolio on the go, download our investor mobile app! Available for Android and iOS users.

Get in touch with our friendly CX team here if you have any questions regarding your signup process.

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Investing

How To Grow The Ang Pow Money Your Receive This Chinese New Year

Chinese New Year is just around the corner and it is an exciting season for many reasons – it’s the best time to catch up with your family over good food, to do house visitations and of course to receive Angpaos. (Chinese red packets containing money gifts) However, many people do not know what to do with their Angpao money.

At a younger age, their parents would usually help to keep them in a bank account. After a certain age, many will end up spending a portion of their Angpao money to splurge on an item they’ve been eyeing and stick the remaining portion in the bank. But all of these are actually missed opportunities to make your Angpao money work harder for you!

If you have ever wanted to try investing but always felt that you didn’t have enough capital to start with, this is the golden opportunity for you to start making small investments and build up! For first-time investors, it may seem daunting to make your first investment and you may be wondering how and where to invest your money. Thus, we have compiled a list of 3 simple ways you can start growing your Angpao money!

Singapore Savings Bond

Singapore Savings Bond (SSBs) are safe, long-term and flexible bonds that are offered by the Singapore government. You can start by making small investments from as little as $500 and receive an interest on your investment that will grow over the duration of 10 years. SSBs are also one of the safest instruments as it is backed by the Singapore government (which has received the strongest “AAA” credit ratings from international credit rating agencies). Moreover, an attractive feature of SSBs is its flexibility where you can cash out your bond at the end of every month and still retain whatever interest you have accrued up to that point – a feature that most of the other bonds do not have! You can head on over to SSB’s website to read up more on it.

Contribute to Your CPF Account

If you are above the age of 18 and are working, you are likely to already be automatically contributing to your CPF Account.

It is wise to top-up your CPF account for a multitude of reasons. Firstly, it does not hold any risks as it is guaranteed by the Singapore government. Secondly, it offers attractive interest returns especially since it holds such low risk – up to 3.5% per annum for the Ordinary Account (OA) and up to 5% per annum for the Special Account (SA). This interest return is better than most bank savings accounts and even safer than investments in big firms. Thirdly, you can receive tax reliefs if you top up to a certain amount, which you can find more information about on the CPF website.

However, it is important to note that a downside to topping up your CPF account is that your investments will be ‘locked’ in your account till withdrawal after you reach 55 years old or through paying for housing or medical bills through MediSave.

Investing in Peer-to-Peer Investments

Peer-to-Peer investments (P2P lending) are an alternative investment option that gives investors an opportunity to earn passive income by financing business loans for small and medium-sized enterprises (SMEs). Our platform connects investors and SMEs looking for business funding, allowing individuals to earn interest on the business loans you invest in.

P2P lending is an easy-to-understand instrument where you can expect your first repayment in as fast as a month after the funds have been disbursed to the SME. Funding Societies will perform a scorecard-based risk assessment to minimise the risk involved in your investment. You can expect returns of up to 14% p.a. depending on the risk profile and is also a great way to diversify your portfolio if you are an experienced investor. You can read more on the  “Overview of P2P lending in Singapore” here!

An attractive feature of investing with Funding Societies is that you can make small investments starting from just $20! It is easy to start investing with us, and you can begin by following our Step-by-Step Guide to Investing!

We hope that this article has motivated you to start growing your Angpao money in these 3 simple ways. Chinese New Year does not have to be just a season of splurging and indulging but it can also be one where you start building your financial securities!

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Alternative Investments

Here’s The Best Way To Start Adding P2P Lending To Your Investment Portfolio Before The (Chinese) New Year

We’re in the time of the year when new year’s resolutions have just been set, and plans for the year ahead are in the midst of being  acted upon.

Now is also an opportune time to gain knowledge and add useful skills to your repertoire.

To help you with this, Funding Societies, Southeast Asia’s biggest peer-to-peer financing platform, is hosting a to introduce you to the world of opportunities in peer-to-peer financing, and how you Funding Societies can help you find and make investments.

As you know, Funding Societies is licensed in Singapore by the Monetary Authority of Singapore (MAS) and has facilitated more than $365 million in peer-to-peer loans across the region.

Here’s what you can learn:

– Learn about how P2P Lending works for investors
– Understand the risks & returns of this investment type
– Hear first-hand from an SME owner about how your investments benefit SMEs in Singapore
– Sharing by Ming Feng from Seedly on how you can gain personal finance knowledge with the power of community

Date: 24 January 2019
Time: 6.30pm – 9pm
Venue: Lowercase Cafe @ 1 McNally Street (Walking distance from Rochor MRT)

You’ll also receive an exclusive goodie bag AND promotions for you when you attend the event.

There really isn’t a better way to start the year and open the doors of opportunity in 2019. See you there!

If you have any questions relating to this and other events, please email Funding Societies at [email protected]

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Alternative Investments

Want To Add Alternative Investments To Your Portfolio? Here Are 5 Kinds You Could Consider

Stocks and bonds are not the only things you may invest in. There is a range of alternative investments available which fits one’s investment profile, risk appetite and investment capital.

Alternative investments refers to any investment which does not fall under the traditional umbrella of stocks, bonds, mutual funds or insurance. Alternative investments may include peer-to-peer loans, private equity, real estate, art and collectibles or forex and more.

The market for alternative investments is increasingly popular – The total global alternative assets under management swelled to almost $6.5 trillion in 2017, up from$6.2 trillion in 2016. And growth is expected to continue, in light of the increasing popularity of retail investments, demand by growing businesses and the development of technology for risk management and portfolio monitoring.

A major selling point for alternative investments is that their returns are not closely correlated to stocks and bonds. This may help investors increase or stabilize portfolio returns while diversifying risks. However, alternative investments come with trade-offs. They tend to be less liquid than stocks and bonds and it may also be difficult to accurately assess the values of each particular investment. Before investing in alternative assets, investors should seek out expert advice and guidance to ensure they fully understand the associated values and risks.

Private equity

Private equity represents an ownership interest in a company. Unlike stocks, private equity investments are not listed on a public stock exchange. Examples of private equity may include angel investors who provide startup capital to companies, venture capitalists who invest in companies that are in their early to mid-growth stages, or buy-out investors who purchase and privatize companies. There is also equity crowdfunding which involves an online offering of a private companies shares. These investors earn returns when the companies thrive, as the value of their ownership interest increases. However, they face risks that the value of their ownership interest may decrease if the business venture fails or does not do as well as expected. In Singapore, brand-name restaurants Crystal Jade and Jumbo are backed by private equity. The investments in these restaurants aid in expanding its franchise beyond Singapore, with Crystal Jade expanding into Greater China and South-East Asia and Jumbo into Shanghai. As private equity requires a relatively large investment for a long term before significant cash flow is produced, this form of Alternative Investments may not be suitable for individual investors who are just starting out.

Real estate

Investors may purchase properties, renovate it and sell it for a profit. Investors may also choose to purchase properties and rent it out to a tenant to earn income each month. While real estate investments can potentially be a profitable investment strategy, buying a property may pose a great financial hurdle for some. Furthermore, depending on the conditions of the property market, land prices may be raised or lowered. This may affect the amount of profits one can earn. To illustrate, if one purchased a property below market value but manages to sell it for a price above market value, his profits earned would be higher. For example, en blocs are a potential way to earn profits, where properties may sell for higher than what its owners originally paid for the property.

Art and collectibles

Investors can purchase and sell fine art for a profit. Some fine art pieces may appreciate over time, earning investors a handsome sum of money. However, investors must be careful about the kinds of pieces that they choose to invest in as not all art pieces on the market may be authentic or appreciate in value. To ensure this, it is best to invest in art through licensed art dealers to avoid purchasing counterfeit pieces and to accurately value the pieces. In Singapore, investors wanting to trade art pieces may attend The Affordable Art Fair held twice yearly, where they may sell art pieces for up to $15,000.

Investors can also trade collectible coins, which can be found on online platforms such as eBay. Investors should do their research or seek expert advice before investing in art and collectibles, to ensure that they understand the true value of the investment as well as to ensure they are dabbling in only authentic goods.

Cryptocurrency

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. Cryptocurrency trading does not require a high start-up capital and opportunities to enter the market are 24/7. The value of cryptocurrencies are widely known to be volatile and unpredictable. Similar to stocks, investors trade cryptocurrency on stock exchanges. There are two ways to obtain cryptocurrency, through “mining” and or buying them from a trading platform. There are many trading platforms now in Singapore that enable you to buy and sell cryptocurrencies. Cryptocurrencies are presently unregulated in Singapore and most of the world. Due to the lack of regulations, cryptocurrencies are highly volatile and investor sentiments tend to fluctuate wildly.

Peer-to-Peer lending

Peer-to-Peer lending (or P2P lending), or debt crowdfunding, is a concept whereby businesses approach a crowdfunding platform for loans which are then funded by a pool of investors. Investors earn interest, paid by borrowers, as returns on their investment. With Funding Societies, you can invest from as low as $20. With a risk-based pricing, investors should remain cautious that there may be higher risks involved in investments which bring higher returns (from higher interest rates). The main risk comes in the form of defaults by borrowers who are unable to repay the loan. Investors should choose a P2P lending platform which carries out comprehensive due diligence on each investment opportunity. However, investors should still note they are not immunised from risk entirely.

Should you invest in alternative assets?

As with any investment, it is important for you to fully understand the investment opportunity before putting any money into it. While there is no harm in diversifying your portfolio and giving alternative investments a try, you should invest in line with your risk appetite.

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Investing

8 Principles of Investing for Beginners and Beyond

To start, there are no investment hacks and shortcuts. Investing requires time, research, and maintenance. Effort? Depends on the instrument. Stocks, for instance, would need more vigilance than bonds, which is mostly a ‘buy and wait for maturity’ affair. Overall, however, there are no instafix to get you high investment returns.

For beginners and those who want to refresh the main principles of investing, we’ve collected 8 crucial tenets.

1. Know that investing is a commitment

Investing can be compared to quality relationships. Both require patience and its close kin, time. There are more investment options available than ever on the market, with new ones like cryptocurrencies and P2P lending entering the mainstream. But before you choose “the one”, you must first determine your investment profile. Then, you need to mull over the pros and cons of various instruments before selecting those that best fit your purposes.

Time also applies to the investments themselves. Some investments allow you to cash out by a relatively quick maturity date. Others take longer. It also pays to take time and review your investments regularly. Depending on how the markets have moved, you may have to rebalance your investment portfolio to fit your personal risk tolerance.

2. Invest when you have enough savings

Everyone has a benchmark for how much savings is “enough”. But it’s essential to have several months’ worth of monthly expenses before you invest your money. Three months’ worth is a good minimum amount, six months’ worth is safer.

If your savings account is stable, you have something to turn back to if you have an emergency and need funds immediately. When all your money is tied up in investments during unexpected times, you may have to withdraw funds when the markets aren’t optimum or when your investments haven’t reached maturity – exposing you to hefty penalty fees.

3. Watch the inflation rate

The interest we get on our savings is insignificant and when you factor in banks’ admin fees, our savings usually stay flat over time. What doesn’t stay flat, unfortunately, is the price of goods thanks to inflation.

Inflation is why we invest; we want to stabilize our purchasing power in the long term. To do so, our investments must beat the national inflation rate. To solve this, balance an investment portfolio that delivers overall returns above the inflation rate.

4. Know your personal risk tolerance

Thereby, know the risk and return principle, which declares that the higher the potential returns, the higher the risk – and vice versa. Because of the risk and return principle, everyone’s investment portfolio will look different as every investor balances risk and reward according to his personal risk tolerance and future goals.

Aggressive investors will aim for instruments with the highest returns, no matter how risky. Their portfolio can consist of 80-90% high-risk instruments. Meanwhile, investors with a low stomach for risk will veer towards safer products.

Age is often, but not always, a factor in determining risk tolerance. Rationally speaking, someone young and healthy, with enough savings and a long period of productivity ahead of him can afford to take more risks.

The idea of establishing your personal risk profile is to support you in building your perfect portfolio – one that reflects your personal preferences.

5. Remember the risk and return principle: anyone promising extremely high returns either requires you to take an equally extreme risk or is selling an investment fraud

Certain instruments can be stable while offering higher returns relative to other instruments, but there is no magic instrument with high profit and no risk. It simply does not exist. Be instantly wary of suspicious offers. Investment scams tend to have several things in common: high and unsustainable returns (think monthly returns above 10%), lack of transparency, general product claims (gold, foreign exchange, etc), and no operational license.

6. Diversify, diversify, diversify

How do you mitigate risk? You diversify your investments. Diversification means allocating your funds among a variety of investments. The more diversified your portfolio, the more protected you are. Even if an investment fails, your overall returns stay positive.

Diversification is how you build your unique investment portfolio. Remember personal risk profile? Maybe you are risk-averse. You may want to compile a portfolio of 70% bonds and fixed deposits, 10% in cash and equivalents, and 20% in stocks. If I’m risk-averse, why not spend 100% of my funds on fixed deposits, you ask? Even “safe” instruments have risks. What happens when fixed deposit interests fall? Your portfolio value will be diminished. Spreading your investment across various assets will prevent this problem.

7. Reinvestment is essential

When your investments generate earnings, you have several options. You can withdraw and cash out. But if you want long-term benefits, you should reinvest those earnings so they generate more earnings.

Say you invest SGD 10,000 into bonds with 7% annual interest. After a year, you have earned SGD 700 in interest. You decide to reinvest the total SGD 10,700 into the same bonds in year 2. SGD 10,700 now reaps SGD 749 in interest earnings rather than SGD 700 and you didn’t do anything.  Over time, you would double your starting principal or more. The key is in diligence and frequency.

8. Invest early because time matters

The reinvestment principle especially shines when you start investing early. Let’s say person A invests in an instrument with 5-6% annual interest at age 25 and reinvests every year. Then there’s person B who does exactly the same with the same initial amount starting age 35. Various graphs show that when they are both 60, person A would have nearly double the money of person B.

Remember: start early, commit over the long term, have enough savings, know your risk profile, be wary of suspicious offers, diversify to build an optimum portfolio, and reinvest your earnings.

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Alternative Investments

Success Story – P2P Loan To Manufacturer

This article first appeared Lets Crowd Smarter, a digital publication about crowdfunding and investing in Singapore and Asia.

Not all crowdfunding schemes are fraudulent. We (the Let’s Crowd Smarter Team) have invested in over 50 crowdfunding schemes across different platforms and our overall experience has been great.

Yes, there are a few problem loans whose repayments are always late. And we’re lucky not to have encountered any outright default yet. But we have seen more successes than failures.

We believe that as long as investors stick to the more established crowdfunding platforms (such as Funding Societies, MoolahSense, Capital-Match, Crowdo and New Union) and have a widely diversified portfolio, the overall returns should be positive.

As an example, our p2p loan portfolio is earning a cash return of about 1.5% per month, or about 12% so far this year.

Read Also: Spotting Red Flags in Crowdfunding Schemes

Crowdfunding Success – A Real Story

Here, we’ll share with you a crowdfunding success story – a p2p loan that we participated with Funding Societies in December last year. The effective interest rate was a cool 23.6% per annum. (We also have similar successes with other platforms and will share them next time.)

The loan ID is SB-1512005 but we’ll respect the borrower’s confidentiality and not disclose its identity. Below are some of the key features of the loan.

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To summarize, this company is borrowing $100k as working capital for a $780k project. It promised to repay over 6 months. Effective interest earned by the lender is 23.6% per annum. As this is a 6-month loan, the actual  interest earned is roughly half of that.

Funding Societies provided further financial information and comments on the borrower. We did a quick review and find the risk to be acceptable. Hence, we decided to lend $1,000 on this loan in December last year.

cf4

Prompt Repayment

Over the next 6 months, this borrower repaid promptly every month. The final repayment was in June 2016. On this loan, we earned the 23.6% effective interest rate per annum – exactly as promised.

cf5

Verifying Our Return On Investment

Now let’s verify that we are indeed earning 23.6% effective interest per annum.

But before we do that, we’ll need to explain the difference between effective and simple interest rates.

Effective interest rate refers to the interest earned on the outstanding loan. When the borrower repays its loan every month, the outstanding loan balance declines. The interest earned by this declining loan balance is known as the effective interest.

On the other hand, simple interest is basically the total interest earned by the loan as a percentage of the initial loan amount. It does not take into account the declining loan principal or the repayment every month.

We prefer to use effective interest rate. Using Excel’s IRR function as shown below, we easily show that the effective return is indeed 23.6% per annum.

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Is it really so easy?

If crowdfunding is so easy, why are there still plenty of negative news about defaults and frauds?

In our view, most of these platforms that ran into trouble are poorly managed. Many are fly-by-night operators that nobody has heard of. Their loan underwriting process is not credible at all. For the recent First Asia Alliance case, there were so many red flags, including the fact that the director of the crowdfunding platform is also the shareholder of the investee companies.

But there are also well-managed crowdfunding platforms that already have or in the process of getting CMS licenses from MAS. This includes Funding Societies, Capital Match, MoolahSense, New Union and Crowdo.

We (at Let’s Crowd Smarter) are comfortable with and have invested our own money with this second group of crowdfunding platforms. Overall, our investing experiences have been great. Of course, we do have some problem loans and late repayments, but these usually form less than 10% of our total portfolio. Success stories still far outnumber the failures we had.

If investors choose the correct platforms, investing into crowdfunding schemes can generate attractive returns without too much risk as shown in this example.

Read Also: Traits Of A Successful Trader

Funding Societies is a DollarsAndSense Brand Connect partner. Funding Societies is Singapore’s leading peer-to-peer (P2P) lending platform. They provide working capital loans for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Investing

How To Manage Your Investment Portfolio Like A Pro

Managing an investment portfolio is a lot like managing a business. With a disciplined, patient, and proactive approach, you can preserve and protect your wealth while attaining financial independence. Your investment strategies might differ, but you’ve to begin with some principles that are consistent at its core, which not only match the markets but your individual characteristics as well.

It’s also important to remember that not all investments in a portfolio may generate returns. It’s a lot like a badminton match – you will lose some points, but to win a game you’ll just have to win more points than you lose. Read the following keys to investing and know how you can ace those points!

Invest only in assets you understand

In many cases, retail investors take action in the fear of missing out on a “sure-shot” investment opportunity. The key is to avoid any frantic decision. Don’t worry about what you don’t know, worry about being sure on what you do know. If you don’t know how an investment actually works, you can’t know whether you really need it. There are plenty of alternative investment opportunities like P2P lending, which are easy to understand and implement. Consider investing in those.

Diversify

It is a prudent approach to create a basket of investments that provide broad exposure within asset classes. It spreads the risk and reward within your investment portfolio. When it comes to investing, the more diversified you are, the better.

We also advise diversification within an asset class or sector. For example, if you invest in P2P lending, you can distribute your investments across as many SMEs as possible to prevent loss in case an SME defaults. Even defaults hardly disturb your rate of return.

If you’re investing in stocks, make sure to not put more than 4% of your total portfolio in one individual stock. This will ensure that if a stock or two faces a downslide, your entire portfolio doesn’t suffer.

Invest for the long term

We believe that a long term horizon is a necessary ingredient for investment portfolio success. Investing is a marathon, not a sprint. Don’t get carried away with the ebb and flow of the market, and stay patiently invested. Also keep in mind that past performances are no guarantee of the future, and individual situations may vary.

Rebalance your portfolio regularly

Over time, your investments may fall out of sync with the original asset allocation. You may also want to restructure investment allocation. Re-assess your portfolio every six months or annually. Try not to tinker with your investment portfolio at short intervals of time – it’s also important to give time to investments.

This article was written by Funding Societies, Singapore’s leading peer-to-peer (P2P) lending platform. They provide working capital loans for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. 

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Business

5 Steps to Digitise Your Business in a Tech-Savvy World

Today’s technology grows at such breakneck speed. Compare the gadgets and online tools you are using today to ten, or even five, years ago. Technology is inseparable from daily life. Take online shopping. These days, many people prefer it to brick-and-mortar shops.

Business owners must adapt to the new digital age to stay afloat and thrive. Everyone needs to digitise their businesses. How to do so? Here are 5 steps:

Set a goal

Never build anything unless there is a set goal. Why do you want to digitize your business? What are your goals? Do you want to gain more sales? Do you want to create awareness for your business? Setting goals will help you decide which digital strategy you need to utilize.

Create your own sites

Invest your capital in creating your own business website. Make the address as simple as possible, preferably using your brand name as the web address. Prioritise design. Don’t hesitate to hire a web designer if you can’t do it yourself. Your company website is your business face. People will assess how professional your business is based on your site interface.

It doesn’t stop with design. You also need clear and useful content on your business website. Make sure that your content is related to your target market. You will gain more leads if you have high-quality content aimed to your target market.

Read Also: 5 Tips to Create & Manage the Best Business Website on a Budget

Use the power of social media

Now that you have your own website, you need to spread the word. This is where social media will help you in the most effective way. Create a Facebook page, an Instagram account, a Twitter account, even a LinkedIn page – utilise as many social media platforms as long as the platform is still within your niche and your company has the capability to maintain these accounts.

Invest in advertising. You can also broadcast your website’s high-quality content via social media accounts for branding.

Create a mailing list

Creating a mailing list will help you to keep in touch with customers. Hold promotions and discounts to attract more people into subscribing. You can also use referral campaigns to gain more subscribers from loyal customers.

Arrange your projects online

If possible, start digitising manual processes. By making your company more digital, you can cut down on inefficiencies and evaluate the overall workflow. Schedule periodic reviews to continue streamlining and evaluating your operations to keep your processes up to date.

Digitising your business is easier than you think. And the benefits are many. Adapting to digital technology will lessen the possibility of human errors and develop more efficient business processes. In the long run, digitising your business saves both time and money.

Read Also: Grow Your Business Without Breaking The Bank

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This article was written by Funding Societies, Singapore’s leading peer-to-peer (P2P) lending platform. They provide working capital loans for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. 

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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Alternative Investments

Default Rates in Peer-to-Peer Lending Platforms

To paraphrase Crowdfund Insider’s “The Ultimate Crowdfunding Guide,” with peer-to-peer (P2P) lending, the risk an investor accepts is default. Every P2P lending platform has its own policy on default, and all investors need to take the time to understand these policies in order to protect themselves.

Because every P2P platform has its own default policy, and because the P2P lending business model is relatively young, we must be cautious when making generalizations about default rates across all platforms. Specific to Funding Societies, we fully aim to keep default rates close to banks – not exceeding 4 to 5% of loan amount to secure healthy returns for investors, even accounting for the cost of default.

The industry’s youth may cause investors with low-risk tolerance to view P2P lending as an unpredictable instrument. Generally, there is a consensus among investors that P2P lending constitutes a higher-risk, but higher-reward investment.

Is this belief true and valid? Let’s take a look at the global trend of default rates in P2P lending platforms.

Default Rates on P2P platforms in the USa

Let’s begin with default rates in USA platforms. In this fascinating article, the author analysed historical trends of default in two well-known USA platforms, then drew conclusions about the default rate of the P2P industry.

(Note that the article was published in 2014, so some might find it dated. However, the analysis within is worth a read)

The writer pointed out that from 2007 to 2008, the USA economy was doing very poorly and that both Lending Club and Prosper were operating under their earliest and most imperfect credit models, which means the default rates of 2007 and 2008 can be waved off. Since 2010, both platforms have averaged a 5% default rate and are likely to continue having solid repayment rates in the future.

The article ends with a positive conclusion about the P2P lending industry. The author wrote: “I see refined underwriting algorithms and mailed borrower marketing, encouraged investor capital and purpose-built technology all repositioning itself over and over for the past eight years until they are arrive at the stable place they hold today. I see analysis and sweat and reanalysis in these charts, and in the end I see it culminating into one of the most simple and creative investments our country has ever seen.”

His statement underscores that under the right circumstances, which includes an innovative team and rigorous credit policies, P2P lending platforms thrive and provide attractive returns while lowering default rates. The key is in selecting a trustworthy platform to invest in.

Read More: 5 Reasons To Invest in Peer-To-Peer Lending

DEFAULT RATES ON P2P PLATFORMS IN THE Uk

Moving on, let’s focus on a well-known and respected P2P lending platform from the UK: Funding Circle. In their statistics page, Funding Circle claims that its average annual default rate stands at 2%. The rate has also remained solid over the years (calculated from 2012-2017), showing that platform maturity and good credit underwriting will stabilise default rates.

funding societies’ DEFAULT RATES

What about our own platform, Funding Societies? Here is our own statistics page. Historically, our default rate across the region has lowered overtime, which reflects the analysis of P2P lending platforms in the USA: continuous platform improvement and rigorous credit policies will lower default rates.

Another worthwhile read about the risks in P2P lending is the study released by the UK Peer-to-Peer Finance Association (P2PFA). Some of the study’s pertinent points include:

  • The P2P industry has created more choice in the financing and investment market.
  • P2P lending platforms conduct credit risk assessment using the financial industry’s best practices.
  • P2P lending does not create systemic risk. Platforms are well-placed to weather a downturn in the credit cycle – defaults would need to increase at least threefold to reduce average interest rates for investors to below zero.

So let’s go back to the question we asked earlier: is P2P lending a higher-risk investment? Not necessarily.

However, the P2PFA study presented two caveats: that there is a good regulatory framework for the P2P industry and that investors are educated. For the first point, MAS has begun setting up regulations for P2P lending platforms. Funding Societies has always been compliant with regulations; we hold the CMS license required by MAS to operate, along with taking due diligence and our credit assessment process very seriously.

For the second point, there will always be risks in investing, including risk of default in P2P financing. But there are ways to mitigate such risks.

Read More: Investing In An Uncertain World

how can i diminish p2p investment risks?

How do you diminish P2P investment risks? You diversify your investment and reinvest your returns.

Diversification means distributing your funds across as many investment opportunities as possible to prevent loss in case of default. The more diversified you are, the more protected your investment. Even defaults hardly disturb your rate of return. If you choose not to diversify, you stand to lose most of your investments should a default occur.

Meanwhile, reinvestment refers to the act of funnelling your investment gains into new investment opportunities to maximise your returns. Without reinvestment, you only receive the expected rate of returns. But with reinvestment, you can maximise (sometimes doubling, even tripling) your returns while minimising your investment risks in case of default.

For more information on diversification and reinvestment, see here.

When investors fully understand the risks of P2P lending and take proper precautions to protect their funds, the advantages of investing in P2P lending clearly outweighs the risks. In fact, it’s very likely that most investors who keep diversifying and reinvesting their investment will continue to earn positive returns.

This is an updated version of an article posted on this blog. Click here for the original article.

This article was written by Funding Societies, Singapore’s leading peer-to-peer (P2P) lending platform. They provide working capital loans for small and medium-sized enterprises (SMEs), along with attractive investment opportunities to the broader public. 

Funding Societies is a DollarsAndSense Brand Connect partner. If you are interested to know them better, you can find out more on what they do on our DollarsAndSense Brand Connect Page.

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