SINGAPORE: Locally-based bullion retailer Silver Bullion launched the world's first bullion-backed peer-to-peer (P2P) loan platform on Wednesday (Aug 5). It is backed by the contents of its storage facility The Safe House, wherein lies about 80 tonnes of silver and a tonne of gold, altogether worth about S$120 million.
If a borrower holding investment grade gold or silver wants to make a loan of S$1,000, for example, he would have to put up bullion worth twice that amount as collateral, which in this case would be S$2,000. If the borrower fails to repay, the bullion will be sold and funds returned to the lender.
By requiring 200 per cent collateral, Silver Bullion said it reduces the risk of credit default, so interest rates are as low as 4.5 per cent per annum.
Said Silver Bullion founder Gregor Gregersen: “For a P2P system, you would see around 14 to 15 per cent interest rates. In our case, because it is so safe, you get a lower return, but you do not have to worry about the chance of default. And by accepting a low interest, that becomes beneficial to the borrower because it means the borrower can loan at a low interest rate."
The platform was pre-launched to a group of its customers about a month ago. Already, it has made 35 loans worth a total of more than S$1 million.
Overall, P2P loan platforms have been gaining traction in Singapore. It has been about three months since the Funding Societies launched its platform targeted at small- and medium-sized enterprises (SMEs). In the first month, it received S$3 million loan applications and disbursed about S$250,000 worth of loans in total.
So far, it has helped seven SMEs obtain funding and by end-August, it expects to make more than S$1 million worth of loans. It recently entered a partnership with a Monetary Authority of Singapore-registered International Trustee, Orangefield, to hold its crowdfunding funds. It said this can help mitigate concerns over mismanagement of funds in the unregulated sector.
"The trustee agency will be handling the funds based on the intended purpose as set out upfront between the lenders and borrowers,” said Mr Kelvin Teo, co-founder of the Funding Societies.
“With that, lenders can be assured the money is going to the borrowers they intended to help grow. And for borrowers, whenever they make monthly repayments, they can be sure that the money went back to the lenders and not to the business platform itself to offset certain expenses or pay off previous investors," he added.
These developments come as the Monetary Authority of Singapore recently established a Financial Technology and Innovation Group to oversee regulatory policies and development strategies in this sector.