At a recent SMU lunch talk, MoolahSense co-founder and CEO Lawrence Yong explained how he built the innovative lending platform to budding entrepreneurs.
Mr Yong’s business model is based on crowdfunding (which is a form of peer-to-peer or P2P lending), connecting companies in need of capital with pools of investors. He explained how he worked for many years in the banking industry before he came up with the idea to launch a crowdfunding website in Singapore.
“One eventful evening, I had to stay behind to execute a trade for a client. There was nobody else in the office so I started Googling and saw an article that talked about peer-to-peer lending. Eventually it opened up my mind that peer-to-peer lending checked a lot of boxes. It used technology to address and resolve some of those challenges faced by SMEs. I felt invigorated to look deeper into this business model,” he said.
This kick-started further research into the lending landscape in Singapore by Mr Yong. He soon spotted a gap in the market for SMEs looking for funding that had been turned down for traditional bank loans, even though they had sound businesses. It also began the start of three years of consultation and working with regulators to approve the lending platform. “Too much attention is given to the top 10% rather than the majority. I learnt that while working in wealth management and investment banking. I was either helping high net worths find investment opportunities or large corporates secure funding. But I realised the majority of the financial system were not being very well served.”
The Team at MoolahSense
The hard work has paid off as MoolahSense has already raised more than $12 million since it first went live in September 2014. Since then it has helped more than 70 companies secure funding and hasn’t yet experienced any defaults. For investors who desire a fixed income return that beats inflation and are looking for opportunities to expand and diversify their portfolio, they can earn rates of return ranging from 9% to 24%. The model appears to be a win-win for both Singaporean SMEs and the investors supporting their expansion or working capital needs.
Crowdsourcing platforms like MoolahSense are desperately needed. While SMEs represent 99% of enterprises in Singapore, make up more than 50% of Singapore’s economy, and account for 70% of employment, they secure just 28%of all business loans offered by banks. Mr Yong added: “The internet democratises knowledge. So if you apply the internet to the sphere of finance then the internet democratised the distribution of capital”. He cited a survey from the World Bank which showed there is a funding gap that has been identified, particularly for start-ups or small companies in the growth stage. “When they run out of cash then it’s game over. Crowdfunding has been identified as an innovation that can fill this gap.”
His advice to budding entrepreneurs and those thinking of launching a start-up: “It’s very important to engage your stakeholders before launching a business. Therefore I ask before I shoot.”
Here’s a video that gives a snapshot of how it all works at Moolahsense:
Lawrence Yong was the speaker at the SMU Kwanpen-IIE Entrepreneurship Lunch Talk “The journey so far and what lies beyond…” held on 14 April 2016. The talk was organised by the Institute of Innovation & Entrepreneurship as part of its monthly series.
