Funding Societies grows losses, top line in ‘toughest year’ yet

Lending is big business.

Digital lending in Southeast Asia brought in billions in revenue in 2023. But it hasn’t been all rosy for the startups banking on this opportunity.

Funding Societies, one prominent player in the space, billed 2023 as “arguably the company’s toughest year since inception,” a company spokesperson tells Tech in Asia. This comes as interest rates in the US rose from 0% to 5% – the highest in 22 years.

The spokesperson also acknowledged that the company is “behind” on its Q4 2024 operational profitability target.

Still, it grew its revenue to US$48.7 million in 2023 – 33% higher compared to the previous year. However, the bump wasn’t a result of a rise in loans.

Loans to customers fell almost 15% year over year to US$144 million in 2023, according to the firm’s audited financial statements. But this was offset by an increase in revenue from payment services during the same period, which leaped to US$8.4 million from just US$629,000 the year before.

Fruitful acquisition

Founded in 2015 by Kelvin Teo and Reynold Wijaya, Funding Societies connects SMEs seeking funding with individual and institutional lenders. The company is present in Singapore, Malaysia, Vietnam, and Thailand. It is also in Indonesia, where it’s known as Modalku.

As of October, the company has funded roughly US$4.2 billion from around 5.2 million financing deals.

The more than tenfold increase in its 2023 revenue from payment services was likely the result of Funding Societies’ acquisition of CardUp – a firm providing expense payment services to individuals and businesses – in June 2022.

The consolidation of CardUp was completed in December of that year, according to a Funding Societies spokesperson. This would make 2023 the first full year that the company’s operations were reflected in Funding Societies’ balance sheet.

See also: Funding Societies swipes right on payments in SEA

The spokesperson says Funding Societies continues to “consciously” reduce loans to customers, as there has been a lower supply of debt that’s priced at a “reasonable cost.” This is largely due to high interest rates and tighter credit underwriting.

At the same time, the firm has been supplementing this with off-balance sheet crowdfunding and loan channeling – where loans are funded by partners such as Bank Pembangunan and SME Corp in Malaysia, and “an Indonesian bank.” Loans channeled by onboarded institutions typically have different risk appetites and are able to support time sensitivity, the person says.

Funding Societies almost doubled the amount it wrote off to US$7.9 million in 2023 after debtors defaulted on their payments. These were borrowers hit by past rate hikes, the firm explains. Most of these debts were from the company’s younger markets as well, the spokesperson notes.

One of Funding Societies’ youngest markets is Vietnam, where economic growth has slowed in 2023 due to weak domestic demand.

Behind on profitability goal

Green shoots