The Company is an Artificial Intelligence (AI) powered SME lending block chain platform.
Unlike many startups we don’t lay claim to lofty goals, we don’t plan to save the world, nor do we have angelic aims of benevolence but we do have a plan to help small businesses get the financial help that they can’t get from banks and other traditional lenders and we’re going to use a combination of artificial intelligence and blockchain technology to make it happen.
We are a Malaysian company and a duly licensed lender under the Moneylenders Act with over 4 years’ experience in financial services in Malaysia. We know our market, we know our industry and we’re aiming to modernize, dare we say disrupt, the world we know.
As well as creating a lending platform we are also creating a network of SMEs enabling us to offer business matching services, network search and other business aids for our clients, in turn helping their business to be more profitable.
xxxx Sdn Bhd was incorporated in year 2015. It is 100% owned by two Malaysian directors with a paid up capital of RM 2M (USD 500k). We began as traditional money lenders, and are now evolving to become the preferred financier for local SMEs.
We have two simple business models:
(i) We charge a 18% per annum for each unsecured loan, with a maximum tenure of 12 months at a hard cap of USD 6,250 per loan. Secured loans (i.e crypto-backed loans) will be charged 12% interest per annum. This rate is as per the approved interest rate as stipulated in the Malaysian MoneyLenders Act 1951.
(ii) We also charge a platform fee of 3% of total approved loan for each successful borrower onboarded onto our block chain platform.
Based on our forecast, the profit margin for the first year alone derived from the lending activities will be 10%, followed by 13% and 14% respectively and we expect the profit margin to remain at 14% after year 3.
Besides the earnings from the lending business, there will be an additional income of USD 600,000 per annum from the platform fees.
The financials are attractive due to:
(i) High gross profit margin of 10% to 14% in the first 3 years from lending activities (see projections below). This is based on interest income which is charged at the statutory 18% rate per annum, and does not include fee income from platform usage yet.
(ii) Manageable credit loss of 4% to 5% as our target segment is SMEs (rather than individuals) with optimal tenures of 12 months. We are also able to use more creative actions for dunning and recovery which traditional lenders are generally restricted from doing.
(iii) Low cost-income ratio of around 25% to 30%, which is much lower than the typical industry rate of 50% or so for lending operations by commercial banks. By automating the loan origination and credit evaluation process with AI and blockchain, we expect this model to be even more cost efficient.
We are requesting for USD 25M (RM 100M). This is in line with our hard-cap target for our planned ICO.
We have already invested about USD 600k (RM 2.4M) to-date and the funds were primarily used to establish a strong business foundation with the necessary licenses, infrastructure, technology and regulatory compliances required to lend money to SMEs in Malaysia and prepare for the ICO. We have developed a detailed financial plan below for the use of the funding proceeds. This plan will be put in motion immediately and enable us to finance about 3,500 loans in the first year.
INVESTMENT RISK AND MITIGATING MEASURES
Investment Risk for this project can be divided into two levels. The first level would be risks that would potentially impact the underlying lending business, and the second level of risks are associated to the ICO.
As for the first level of risk, it is mostly related to the business being adversely impacted by non-performing loans (NPL) and loans that are subject to be written off because the borrower is not physically capable to repay the loan due to death or permanent disabilities. Delays in loan repayments will also impact our operations.
Steps taken to mitigate these risks are:
(1) First level of borrower filtration is to be based on a psychometric assessment via our Virtual Assessment Centre. We have already engaged with one of the world’s leading psychometric solution provider. The intention is to use these scores in tandem with the credit bureau scores for loan approvals.
(2) Our partner has developed a universal digital credit scoring technology that leverages psychometrics and behavioral science to effectively score anyone, anywhere, at any time. With 10 years of experience enabling over $1.6 billion in loans globally, they have served leading financial institutions across Latin America, Asia, Africa and Europe.
(3) All loans originated by the Company will be strictly in accordance to the Malaysian Money Lending Act 1951, enabling us to enforce recovery using legal actions in the event of borrowers defaulting on their repayments.
(4) The Company will be linked to local credit bureaus and Central Bank of Malaysia to obtain available credit history on borrowers. We have already partnered with two local credit bureaus to-date. Our partnership with the mentioned credit bureaus will also enable us to blacklist defaulters.
(5) Collection of repayments will be done via auto-debit facility from the customer’s bank account to our corporate account.
(6) All funds will be disbursed via online transfer from our corporate account to customer’s bank account.
(7) Each loan will also be underwritten with an insurance which can be crystallized in the event the borrower is unable to service the loan due to a permanent death or permanent disability caused by an accident.
We will only acccept collateralized loans in the form of loans backed by cryptocurrency (BTC, ETH, XRP) for borrowers who are above our risky tolerance levels. Loans will be subject to 50% LTV and these crypto currencies will be held in the platform until the loan is serviced fully services.
As for the second level of risk which is related to the ICO – we have engaged with one of Malaysia’s top ICO lawyer firms to ensure that the planned ICO activity and tokens created are in accordance to the best practice and regulation imposed by Security Commissions Malaysia.
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