In a special interview with former Singapore politician and entrepreneur advocate, Inderjit Singh, he talks about how the entrepreneurial ecosystem in Singapore is largely shaped by government policies, reforms, and regulations to better support such enterprises. Importantly, cost structures such as property rentals and land costs have to be rein in.
Singh shared his personal experience on how he formed a committee on my own to study the financing landscape in Singapore. He managed to rope in entrepreneurs, banks and even government representatives to be part of the committee. The Recommendation for Financing of SMEs was then published in 2002 after Singh and his team travelled widely in search of plausible methods of SME financing. The government got word of the published paper and asked for Singh to communicate these findings to them and thereafter accepted most, if not all of the recommendations stated in the paper. In the next 10 years, these suggestions were then implemented gradually to help growing SMEs go global.
Singh also spoke on how there may be a distortion in the kind of incentives offered by local government and non-government agencies. He believes that these agencies have their own KPIs and works exclusively in silos. While Singh argues that these funding opportunities is not entirely bad as it still largely drives the formation of more companies, Professor Wong Poh Kam offers a slightly different perspective. Singh and Wong are in agreement on one thing though. That funding goes into building gazelles, rather than zombie companies could propel Singapore’s entrepreneurial ecosystem forward.
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Dealflow, scalability, and trust – a P2P crowdfunding startup is a 3 legged stool, without one of these, it risks a collapse. P2P crowdfunding has been a relatively recent phenomenon in Singapore, with the first platforms that are still operational having started in 2014/2015.
1. Dealflow – Gaining traction and proving the concept
Lining up a decent quality dealflow and attracting companies that are stable will be the main challenge that the platforms face. Two things are required for this, first, the interest rates of between 10% – 40% annualised need to decrease to become competitive with those of established financiers. Those rates are good to compensate yield hungry investors for the risk, but are difficult to sell to companies with a stable outlook that might be able to access bank financing at a lower interest rate.
Second, platforms need to increase the organic inbound leads and automate the onboarding of new clients. Hence, the challenge is to compensate investors adequately for riskier loans, while making the interest rate attractive enough for SMEs to see P2P Funders as a strong long-term partner, and to decrease the customer acquisition cost.
2. Scalability: Making the business viable in the long run
Once a platform has been able to implement the right processes, scalability is critical for the long term viability and also mostshareholders.
3. Trust: Ensuring stable operations
Lastly, Fintech is ultimately about offering a financial service and therefore, trust is paramount. Many Fintech companies are still young and have not established a track record. Becoming a player in the P2P Financing sector requires staying power and a sufficient amount of capital.