Malaysian venture capital firm 1337 Ventures, which also holds an equity crowdfunding (ECF) license, is working on transforming its entire operations to be in compliance with Islamic principles as it seeks to capture Shariah compliant deal flows.
“We are a conventional ECF platform, but we are undergoing the regime to be Shariah compliant. Why? Because I don’t want to lose access to deals. We have seen really good commercial-driven companies, but they are within the Halal or Shariah compliant realm, and they want to fundraise in the same light,” Bikesh Lakhmichand, CEO of 1337 Ventures, revealed at the recent IFN Asia Forum 2022.
1337 Ventures’s move into the Islamic space is part of Malaysian wave of conventional peer-to-peer (P2P) and ECF players rushing for Shariah compliance to tap the Muslim market. Since the first (and only) Islamic P2P platform was licensed by Securities Malaysia back in 2016, the number of P2P financiers which are now offering, or preparing to provide, Islamic financing – either on a fully-fledged basis or window model – has grown eightfold.
In addition to the first licensee Nusa Kapital, Malaysia now counts B2B Finpal, Bay Smart Capital Ventures, Capsphere, Crowd Sense, FBM Crowdtech, microLEAP, Funding Societies, Moneysave, Fundaztic and QuicKash as providers of Shariah P2P services as well.
As of the end of June 2022, at least 5,000 MSMEs raised over RM3 billion (US$645.46 million) through ECF and P2P platforms, with Islamic disbursements accounting for about 10%.
“What’s interesting is that we are seeing a lot more demand from institutional investors looking for Shariah compliant asset classes, alternative asset classes, for that matter and we see a lot more collaboration between banks… This demand is driving many conventional fintech platforms to tap the Islamic market either via a window or fully compliant basis,” observed Dr Wong Huei Ching, the executive director of digital strategy and innovation at Securities Commission Malaysia.