17In addition, Malaysia’s LEAP
market for example has facilitative
rules and regulations to lower the
cost of compliance. For example,
the disclosure requirements for
companies listed on the LEAP market
are less onerous. No prospectus is
required to be issued, and continuing
disclosure requirements are less
frequent than that of the Main Market
and ACE Market.
However, as a result of the less
stringent compliance requirements,
only sophisticated investors are
allowed to invest on the LEAP
market. Sophisticated investors are
deemed to have better knowledge
on the potential risk and return of
this market. This is unlike the Main
Market and ACE Market, which
have more rigorous compliance
requirements for the protection of
public investors.THE RISE OF ALTERNATIVE LENDING
Further alternative sources of finance
can also come from entities not
traditionally associated with finance.
In 2010, Alibaba launched a micro-
credit company, Alipay Financial,
based in the city of Hangzhou,
to offer loans from its own cash
resources to existing SME users of
its e-commerce services. Initially
it offered 30-day working capital
advances of up to RMB500,000 to
fund sales of goods via its Taobao
online marketplace. Subsequently,
the business expanded geographically
and began offering a wider range
of loan products. Larger loans
could be secured by groups of three
SMEs standing as guarantors for
each other. Alipay Financial later
began originating loans among
users of Taobao on behalf of China
Construction Bank and the Industrial
and Commercial Bank (ICBC) of
China, among other mainstream
financial institutions, to expand its
lending capacity.
Alibaba in China has
overcome the lack of reliable
third-party credit information on
SME borrowers by relying on the
transaction and payment data that
Alipay, its proprietary payments
system, collects. This has allowed
it to build a predictive model for
assessing credit risk among its pool
of potential borrowers. Similar
strategies are being pursued in the
US and elsewhere by lenders thatMAJOR TRENDS
DRIVING SME FINANCING INNOVATION
NEW SOURCES OF FINANCIAL INFORMATION
(^) The growth of electronic payments systems is a powerful new source
of financial information, especially for small-volume borrowers.
SMES ARE MOVING ONLINE
(^) The online activity of SMEs can be mined for real-time information,
allowing lenders better insights into their creditworthiness.
ACCEPTANCE OF ONLINE FINANCING CHANNELS
(^) Similar to Internet shopping, funding platforms are also moving
online—particularly P2P and crowdfunding platforms. This also allows
for much lower overheads than a large branch network.