Local Crowdfunding investment in SME

[specuvestor]

If we do a decision tree with the highest default rate (as computed by the funding platform) and compare that with the alternative of leaving your money in say OCBC 360, the interest rate required to compensate one to offer funds to them should be higher. It is far easy for a layman to be seduced by the rates bandied around.

Next, if I am not wrong, one has to declare income received from such lending activities for income tax.

IIRC, bank interest is also subjected to income tax. The only exception is POSB.

I don't quite understand the first paragraph. I reckon, diversification is a necessity to participate the crowdfunding. Concentrated approach is never right IMO.

bank interest has not been taxable for personal income tax purpose for at least 10 years already

https://www.iras.gov.sg/IRASHome/Individ.../Interest/

Technically crowdfunding income should be taxable but I reckon that's the least of one's analysis

Concentrated approach makes sense if you know what you are doing

Thank you to enlighten. Yes, I am wrong in the assumption. Learn a new thing today.  

CF u too big time to notice tax on interest it was changed around the time section 44 franking of dividend was abolished

On another note the fallacy on the banking mathematical model is that default does not mean zero payout.

Aiyo crowd funding is the modified version of 'ton-tin chit fund model' of which long ago been started by China and cases of the founder run away with the money.

For MoolahSense, you bit for the interest rate, the lower u bit the better chance u get it, if its a popular company wanted to borrow money, like the recent a Mobile scooter company closed at 13% p.a.

But usually not popular company the allocation is 'first-come-first served' basis like the coming a manufacturer of elastomer seals. Target to loan 200k, offering 19% p.a. on 12 mths equal installment.

You may apply to be their member, go into their website and you will notice some companies (e.g. a mobile related co) every month loans 150k - 200k from this scheme and becos of the lucrative commission (3k -5k) per application they will just approve it and pass the risk to the greedy investors.
Take upfront money return interest to investors, like using many credit cards scenario.

To me, its a 'Ponzi' scheme, capitalize on human weakness that is 'greedy' wow 19% p.a where on earth u can find this return.

The borrowers will keep on coming to this place to take easy money, one day if you don't approve my loan , I no money pay you and I will default...run road or declare bankrupt.

As for China case, the founder using 'Gemini Chit Fund' method, create all the fictitious hollow companies all money go to actually one person, then run-road.

Well, its only my personal opinion.

Actually the tontine structure is a discounted loan upfront which reduces counterparty risk. In addition the people in the structure knows almost every one through grapevine.

These are not evident in crowdfunding. Counterparty risk is too high unless borrower has physical asset collateral else my sense is crowd funding is doomed as an investment product except for social non profit ventures

I'm actually wondering if this crowdfunding thing falls under the Chits Fund Act ie tontine or can we revive the tontine structure?