Singapore-based P2P online lending platform Validus Capital has partnered with insurance provider EQ Insurance to offer investor protection on some of the financing it provides to small and medium-sized enterprises (SMEs), according to StraightTimes. Validus Capital claims to be the first platform in Singapore to provide investor insurance on its invoice financing services.
“We recognise the quality and importance of Singapore’s SMEs, as our platform supports their continued growth,” observed Validus Capital Chairperson Richard Hoon. “As the industry matures, our partnership with EQ Insurance will give greater confidence, to investors and borrowers alike, in the capability and stability of our platform.”
A rigorous 80-point due diligence and risk assessment process is conducted on the Singaporean loan applicants, backed by data from the Singapore Commercial Credit Bureau, as well as the Credit Research Institute (CRI), founded by Professor Jin-Chuan Duan at RMI-NUS, according to the platform. The strength of this risk control, with an additional daily credit monitoring report on borrowers, means more visibility and greater investor protection. The CRI team provides Validus with a reasonably sophisticated solution in capturing the Probability Default (PD) of SME’s. The CRI is a not-for-profit enterprise, viewing credit ratings as a “public good,” challenging to move away from the current “for-profit” model.
“We commend the stringent risk assessment process undertaken by Validus Capital in approving the SMEs on-boarding their platform,” EQ Insurance CEO Ronald Cheng noted. “Our partnership will not only provide investors with greater reassurance but will also present great opportunities for those SMEs in these tightened economic times. We look forward to what our partnership will achieve.”
Founded in 2015, Validus Capital, an online lending platform that links SMEs with investors and conducts due diligence on SMEs that apply for financing, views adding insurance for investors as an extra layer of protection, Validus Capital co-founder Vikas Nahata told StraightTimes, adding
“Peer-to-peer lending platforms have recently been plagued with issues on governance and trust, as well as rising non-performing loans. We… recognise that invoice financing is key for Singaporean SMEs and offering insurance to the investors is a way of securing them. This encourages participation from the lenders and creates a win-win scenario for all.”
To date the P2P lender claims a clean record of a zero-per-cent default rate to date thanks to its “rigorous due diligence,” the company told StraightTimes; Validus Capital has had 27 SMEs approved for invoice financing services, each with an average revenue of $5 million. According to the platform, Validus Capital has provided an average loan of $200,000 with a tenure of six months. With its rigorous due diligence, Validus Capital thus far has had a zero percent default rate, coupled with a greater than 18 percent annualised return to investors.
Other firms operating in the space said they are also exploring more ways to protect investors, especially as online financing platforms gain traction. Data released by Monetary Authority of Singapore (MAS) measures the business loan market in Singapore at $357 billion in 2015. Over the same time-period, global peer to peer lending market was valued at US$26.16 billion according to Transparency Market Research.