Crowdfunding critical source of alternative financing for SMEs

KUALA LUMPUR: Crowdfunding is expected to pick up pace in the near future as a critical source of alternative financing for micro, small and medium enterprises (SMEs) in Malaysia, says the Asian Institute of Finance (AIF). 

According to findings of its research study released on Wednesday, the key priorities to boost crowdfunding include building an informed community among small business owners and the general public, grooming entrepreneurs.

The priorities include enlarging the investor pool, raising the profiles of platform operators, increasing project pipeline flows and reinforcing the synergies among institutions dedicated to SME promotion. 

The report, entitled “Crowdfunding Malaysia’s sharing economy: Alternative financing for micro, small and medium enterprises”, sees a vibrant crowdfunding environment emerging in Malaysia.

Crowdfunding has been given a boost following Bank Negara Malaysia’s (BNM) policy support for alternative financing and the Securities Commission Malaysia’s (SC) introduction of regulatory frameworks for equity crowdfunding (ECF) in 2015 and peer-to-peer financing (P2P) in 2016. 

Crowdfunding has grown in earnest in Malaysia since the introduction of the ECF and P2P regulatory frameworks and the SC's appointment of six platform operators for each in 2015-2016. 

BNM also views Crowdfunding as a crucial financing alternative for the more than 900,000 SMEs in Malaysia, whose development is a top priority for the government. 

The CEO of a P2P operator, Funding Societies, Wong Kah Meng said the report provides a useful local perspective on the early development of the alternative financing and investing landscape in Malaysia.

“More importantly, (the report) highlights the key challenges and hopefully initiates the much-needed set of discussions amongst industry participants and regulators, both locally and regionally, to support the development of this promising yet nascent industry,” he said. 

“Being a regional P2P financing platform, we are navigating similar challenges across Southeast Asia, making the insights from this report very relevant to the broader region as well”. 

The CEO of FundedByMe Malaysia (an ECF operator), Daniel Goettfert said AIF’s analysis of the Malaysian crowdfunding landscape highlights the importance of key contributors like the regulators (SC) and policy makers who are keen to nurture innovations in finance, as well as the role of platform operators in providing a regulated online marketplace to bring entrepreneurs and investors together. 

“The FundedByMe and Alixco P2P team strongly believe that this report will raise the visibility of equity crowdfunding and P2P financing in the Malaysian market.” 

The CEO of AIF Dr Raymond Madden pointed out: “Small businesses and start-ups are excited by the prospects of crowdfunding, the pool of retail and sophisticated investors is expanding and public awareness of its benefits is on the rise. 

“In line with global and regional trends, we expect growth for crowdfunding in Malaysia in the coming years, subject to further strengthening of its ecosystem.” 

The report is based on a two-phase research study consisting of a quantitative survey of the public and SME entrepreneurs within the Klang Valley, as well as desk research and consultations with crowdfunding platform operators, government agencies/institutions, sophisticated investors and start-up entrepreneurs. 

For more information on the research report, visit http://www.aif.org.my/