The Malaysian arm of SME digital financier Funding Societies has introduced a range of new Shariah compliant products to anchor its commitment and influence in the growing Islamic fintech space of Southeast Asia.
The new products – business term financing-i, micro financing-i and invoice financing-i – follow the launch of the P2P platform’s first Islamic product in May last year, a trade finance solution.
“Access to finance is mission critical for inclusive growth and MSME development. Case in point, there is a RM90 billion (US$19.51 billion) SME financing gap in Malaysia. To that end, SME digital finance platforms like Funding Societies play an important role in closing that gap. Given Malaysia’s leadership in Islamic finance, it is timely for us to scale our Shariah compliant proposition to support creditworthy Malaysian SMEs of all sizes to thrive,” explained Wong Kah Meng, the group chief operating officer of Funding Societies | Modalku and the co-founder of Funding Societies Malaysia.
Founded in 2015, Funding Societies has been operating in Malaysia since 2016 and offers a range of short-term financing solutions; it entered the payments and collections business in 2017. As at the end of 2022, the group (also present in Singapore and Indonesia) disbursed US$3 billion in financing to almost 100,000 SMEs through over five million transactions. In Malaysia, it disbursed RM2 billion (US$450.81 million) in financing since its inception. Overall platform cohort default rate stood at under 2%.
It has seen encouraging take-up from SMEs for its Islamic product since its soft launch in May 2022. The fintech platform targets to have at least 50% of its disbursement from its Shariah compliant financing portfolio by 2025.
“Following market feedback, we observed demand for Islamic finance and Muslim entrepreneurs’ need for Shariah compliant financing. Islamic finance is also appealing to non-Muslims given its emphasis on fairness and transparency in fees and charges. Besides that, the introduction of our Islamic financing aligns with Malaysia’s aspirations to be the leader in Islamic finance as well as focus on the Islamic digital economy and fintech,” said Chai Kien Poon, the country head of Funding Societies Malaysia.
“Besides launching our Islamic financing proposition, we have developed Shariah compliant investment products for our investors. This allows investors to diversify their investments while joining us to support a critical segment of the Malaysian economy. We have seen very encouraging demand from investors (retail, high net worth individuals and institutions) and look forward to working with financial institutions to offer Shariah compliant investments to their customers,” added Chai.
There are at least 58 fintech start-ups providing Shariah compliant services and products in Malaysia, according to the IFN Islamic Fintech Landscape as at the 30th May 2023.
|PRODUCT||Business Term Financing-i||Invoice Financing-i||Micro Financing-i|
|Accounts Receivable Financing-i||Accounts Payable Financing-i|
|Description||Working capital financing||Cash advance against invoices||Purchase order financing||Working capital financing for micro SMEs|
|Rates||1 – 1.5% p.m.||0.8 – 1.5% p.m.||0.8 – 1.5%.|
|Tenure||Up to 18 months||Up to 120 days||Up to 18 months|
|Financing Quantum||RM100,000 – RM500,000||Up to RM1,000,000||RM3,000 – RM200,000|