Working capital Management_Malaysian SMEs_ P2P lending

Using an exploratory approach, we observed 125 loan applications from October 2023 to February 2024 from Funding Societies, Malaysia’s largest P2P platform. We used descriptive and correlation analyses to determine the characteristics of MSMEs that use P2P platforms to obtain working capital. We found that these firms were repeat platform users, whereby only 40 MSMEs had made the 125 borrowings at an average interest rate of 13%. Most firms were from the wholesale and retail industry while account payable financing was the most popular type of working capital financing. We found that these MSMEs issued Islamic accounts payable notes at relatively high interest rates, considering the low amounts borrowed and low tenures on these Islamic notes. We found that these MSMEs were mostly 6 to 10 years old hence, few young firms used P2P lending. There was no micro-enterprise among these firms. We observed that manufacturing MSMEs outperformed those in the wholesale and retail sectors in terms of revenue, revenue growth, and average growth margin in 2020 and 2021. In the correlation analysis among 22 financial and non-financial variables, we found 23 combinations that were negatively correlated and 69 combinations that were positively correlated. These findings have varied implications among the different P2P lending stakeholders. This is the first exploratory study to give deeper insights into the features of MSMEs that use P2P online lending to obtain working capital in Malaysia.