Funding Societies — a peer-to-peer (P2P) lending marketplace — has selected Orangefield Trust to hold the crowdfunding funds received from lenders.
Given the absence of a governed framework in P2P lending in Singapore, the onus is on P2P lending platforms to find ways to gain the confidence of lenders. This collaboration thus aims to provide lenders and borrowers increased transparency and protection as Orangefield Trust has a trust business licence that is issued by the Monetary Authority of Singapore.
"Lenders will want proof that their funds are distributed to the small and medium-sized enterprises (SMEs) directly, and not used to pay back other investors or to bail out the lending platform in the event that it does not have sufficient funds. It is therefore important that lending platforms use a registered trustee to hold all investors' funds that are not loaned to SMEs," said Professor Julian Wright, Head of Department of Economics, National University of Singapore and mentor to Funding Societies.
With a regulated lending system in place, Funding Societies aims to alleviate the financing woes of SMEs. Due to a weakening economic climate and stringent banking regulations, P2P lending has become increasingly important as a source of business credits, said Funding Societies. This is because it brings about a more personalised solution, providing SMEs an alternative to strict sets of criteria that bank loans require.
"SMEs have always struggled to raise funds through traditional methods such as banks and credit card loans, due to their small size and limited track records. Funding Societies sees the importance in helping businesses to get the right amount of funding at the quickest possible time so as to minimise time-lapse," shared Kelvin Teo, co-founder of Funding Societies.