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Editor's PickSC counting on Islamic P2P and ECF operators to spur capital market...

SC counting on Islamic P2P and ECF operators to spur capital market post-pandemic

Securities Commission Malaysia (SC) has opened new applications for Shariah P2P and equity crowdfunding (ECF) market operators with hopes of enhancing the Islamic fintech ecosystem and bolstering MSME funding access.

This latest exercise is one of four new digital initiatives by the SC to grow digital-led alternative financing avenues to meet the growing demand by MSMEs and mid-tier companies (MTCs), particularly as they recover from the COVID-19 pandemic.

The other measures are: onboarding new P2P operators focusing on debt-based financing by MTCs and other larger companies; opening registration of new recognized market operators-digital asset exchange (there are currently four) to facilitate regulated digital asset investments; and establishing a RM30 million (US$6.33 million) Digital Innovation Fund (DIGID) to boost capital market digitalization.

Table 1: P2P and ECF financing statistics from January 2017 to June 2022

 P2PECF
Campaigns41,365293
Amount raisedRM2.97 billion (US$626.94 million)RM503.61 million (US$106.31 million)
Issuers5,166274

Source: Securities Commission Malaysia

After introducing ECF regulations in 2015 followed by P2P guidelines the following year, 11 P2P and 10 ECF operators have been licensed in Malaysia. There are only one Islamic ECF operator (Ethis Ventures) and one fully-fledged Islamic P2P platform (Nusa Kapital) along with a handful of conventional P2P lenders offering Islamic solutions. Collectively, P2P and ECF operators have facilitated the raising of RM3.5 billion (US$738.81 million) from about 41,000 successful campaigns for at least 5,400 MSMEs, but only approximately 10% are Shariah compliant.

Diagram 1: Regulated P2P platform operators in Malaysia as at the 12th September 2022

*approved or working on offering Islamic investment products

Applications for ECF, P2P and DAX are open from the 1st November 2022 while the updated guidelines and forms will be made available from the 15th November 2022. DIGID applications however will only open from the 1st January 2023. DIGID will co-fund innovative projects by capital market intermediaries that utilize technology to enable new and competitive propositions for the Malaysian capital market. Successful candidates will receive funding, on a reimbursement basis, of up to 70% of approved qualifying expenses, capped at RM500,000 (US$105,545) per project.

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