CapitalBay, a Malaysian multi-bank supply chain finance platform, has received regulatory approval to operate a peer-to-peer (P2P) financing platform aimed at improving financing opportunities for the country’s SMEs.

This means that non-institutional – or retail – investors can now join the banks and institutional investors that already provide financing to Malaysian businesses through the CapitalBay platform. Approval was granted by the Securities Commission Malaysia on the matter last week. A go-live date is due in the next three months.

Both Malaysian and foreign investors are able to offer financing through the platform, but only Malaysian businesses can access funds. A CapitalBay spokesperson tells GTR that a cross-border product to allow foreign businesses onto the platform is under development.

CapitalBay specialises in short-term working capital financing, offering products such as invoice financing to SMEs across various industries. Most of the deals on CapitalBay’s platform are backed by invoices due from large institutions such as multinational companies, blue-chip companies and government-linked entities. The platform uses a payment risk scoring model that predicts the risk of each transaction through machine learning.

The platform has been facilitating transactions between Malaysian businesses and banks, including Hong Leong Bank, OCBC Bank and RHB Bank, and institutional investors since it started operations in Q4 2017. So far it has facilitated the financing of more than 1,300 B2B transactions worth RM75mn (US$17.9mn) with no defaults, it says.

By gaining this licence, CapitalBay says it is seeking to tackle the fact that traditionally, banks’ credit assessment processes are tailored for larger deal sizes, which results in a high rejection rate for SMEs.

CapitalBay co-founder Ang Xing Xian says: “Cashflow is the lifeline for many businesses. Today, many small businesses struggle with cashflow and traditional lending models find it difficult to fulfill this gap. We believe that by shortening the cash conversion cycle for businesses, this unlocks cashflow for them to grow their business, which is the basis for setting up CapitalBay.”

CapitalBay is currently only active in Malaysia but is in the process of applying for approval by the relevant authorities to expand to other countries, including Singapore and Thailand.

It is one of many new P2P platforms seeking to bridge the financing gap in Asia. It joins the likes of Beehive Asia in Thailand, which offers an online marketplace for SMEs to get invoice financing.