DBS Bank has entered into cross-referral agreements with peer-to-peer (p2p) lending platforms Funding Societies and MoolahSense, becoming the first local bank to initiate partnerships with these crowd-financing platforms.
This significantly expands the capital sources available to small businesses, enabling DBS to refer some segments of the small & medium enterprise (SME) community that the bank is unable to lend to – to Funding Societies and MoolahSense.
This follows DBS launching a venture debt programme providing financing to technology startups in 2015.
In exchange, the crowd-financing site will refer borrowers who have completed two successful rounds of fundraising to DBS for larger commercial loans and other financial solutions, such as cash management. In order to protect borrower privacy, the bank and p2p lenders will only share information when they have obtained borrowers’ consent in advance.
This latest move expands the range of solutions DBS offers SMES, while furthering the maturity of P2P financing as a mainstream financial option. This latest initiative marks another collaboration between DBS and fintech ventures.
The viability of crowdfinancing platforms was shown when MoolahSense helped Singapore-based Apple products reseller EpiCentre raise S$1 million in less than 48 hours.
Earlier this year, DBS piloted a new method for conducting credit assessments for small business loans through collaborating with AMP Credit Technologies to launch a working capital loan for small businesses accepting card payments and were operational for at least six months.
Rather than relying on financial statements, personal income statements and physical collateral, the joint credit assessment takes into account electronically verifiable cash flows to assess the health of the businesses and their ability to repay.
“We are honoured to collaborate with DBS, making this the first tie-up in Singapore between a P2P lending platform and an established bank. This is a win-win relationship that helps SMEs gain access to capital at all phases of their growth journey. We are confident that this partnership will greatly benefit both SMEs and investors, bringing more quality opportunities in alternative financing and alternative investment to the society,” said Kelvin Teo, co-founder of Funding Societies.
Historically, business entities lacking audited accounts and personal income statements were underserved, due to banks lacking the tools to assess their credit risk and preference for lending to companies with collateral, an established operating track record and at least two years of audited accounts.
In 2015, DBS grew its borrowing base by more than 10 per cent. Under SPRING Singapore’s Micro Loan Programme (MLP), DBS receives an average of 1800 SME applications per annum, with more than half of all micro loan applications supported by SPRING. As such, DBS claims to have accounted for the highest number of loans and loan quantum under the MLP for the period between 2011 and 2015.
Commenting on the partnership, Joyce Tee, Group Head of SME Banking, shared: “DBS’ partnership with Funding Societies and MoolahSense is a good example of how traditional and alternative finance providers can work together to support the funding needs of small businesses. Such partnerships are becoming common in markets such as the UK and we are pleased to partner two leading p2p lenders in Singapore in this pilot programme.”
Lawrence Yong, CEO, MoolahSense observed: “Through this partnership, the funding continuum is being extended with more financing solutions to support the growth of local SMEs – the backbone of our economy.”