Lending

First Singapore SME Lending Platform to Provide Investor Protection

Validus Capital, an SME lending platform, has announced it will be the first platform in Singapore to provide investor protection for their invoice financing loans. Partnering with insurance provider, EQ Insurance, Validus Capital will join the ranks of China’s Lufax in Asia, which launched in 2011 and is now valued at $18bn.

A rigorous 80-point due diligence and risk assessment process is conducted on the Singaporean loan applicants, backed by data from Singapore Commercial Credit Bureau, as well as the Credit Research Institute (CRI), founded by Professor Jin-Chuan Duan at RMI-NUS.

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.

The strength of this risk control, with an additional daily credit monitoring report on borrowers, means more visibility and greater investor protection. Validus Capital provides a select borrowing pool of quality, growth-oriented, SMEs with EQ Insurance providing blanket cover across all invoice financing loans.

Richard Hoon, Chairperson of Validus Capital said “We recognise the quality and importance of Singapore’s SMEs, as our platform supports their continued growth. 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.”

Ronald Cheng, CEO of EQ Insurance said “We commend the stringent risk assessment process undertaken by Validus Capital in approving the SMEs on-boarding their platform. 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.”

Professor Duan, founder of the CRI said: “At the research centre we believe the current credit rating analytic model needs to be advanced in line with scientific developments. Viewing it as a not-for- profit model will allow us to strengthen the basis of the financial infrastructure, while creating a reliable and visible assessment method. With the comprehensive risk tool, Validus Capital are taking steps in nurturing for positive social change.” Validus Capital have provided an average loan of $200,000 with a tenure of six months. Sixty-one percent of loans are to borrowers with a Dun & Bradstreet credit risk grade of less than or equal to 3, indicating a fair rating. With its rigorous due diligence, Validus Capital thus far has had a zero percent default rate, coupled with an 18 percent annualised return to investors.

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.