KUALA LUMPUR: More crowdfunding platform providers are setting up shops in Malaysia, tapping on the growing appetite among startups and SMEs for funding.
The most recent one is the first Islamic equity crowdfunding (ECF) Ethis Venture, which is known for financing social housing projects in Indonesia.
Founder Umar Munshi said there are multiple reasons to choose a crowdfunding model.
“In the past, funding options are mainly through banks and financial institutions or family and friends, ” he told StarBiz.
In addition, Umar reckons that the crowdfunding offers investors a new asset class that was previously not available to the market, as well as connecting members of the society in supporting projects that have social impact.
“The younger generation nowadays prefer to invest in something that has a social impact.
“They want to be empowered, ” he said.
“In the past, a majority of this kind of investments will flow into venture capital, private equity and high net worth investors.
“But now, all levels and types of investors would have a chance as the minimum investment is low, ” he added.
According to data by the Securities Commissions, a total of RM550mil has been raised from ECF and peer-to-peer (P2P) platforms since inception in 2014.
There are more than 15,000 people participated in this platform and about 92% of the investment came from retail investors, and 52% are aged below 35 years old.
For Ethis, Umar said the company started its platform in Indonesia in 2014 and has so far raised more than RM30mil to invest mainly in affordable housing projects.
“About 30% of the investments have been disbursed back to investors, ” he said.
For Malaysian platform, which is expected to be launched in January next year, Umar said the deals would range from SMEs to property, and agriculture-related projects such as vegetable farming, and wakq.
“In Indonesia, the platform focuses on project financing, while for Malaysia, we will be looking at both SMEs and project financing, ” he says.
When asked on the liquidity in ECF investment, Umar agreed that it is not as liquid as the stock market.
“We would be looking to offer deals that are focusing on projects where companies would be setting up special purpose vehicle (SPV) for investors to buy shares in these SPV.
“There would be a specific timeline for how long the investment will take, ” he said
The new platform, named Ethis Equity, targeted to be launched in 1Q20. For the first six-month, Ethis is targeting to introduce 10 deals on its platforms.
“The deals would featuring be Malaysian companies and they have to be shariah-compliant, ” Umar said.
“Our role is to connect the connect community in projects that have a social impact with the element of commercial in it. For the first year, we are looking to finance about RM5mil worth of projects, ” he added.
He pointed out that ECF and P2P platforms should not be viewed as a competitor to banks and financial institutions, but should work in collaboration.
Towards this end, Ethis has partnered up with Alliance Islamic Bank Bhd to launch the latter’s social crowdfunding platform, SocioBiz, to create greater socioeconomic impact for the financially disadvantaged.
The AIS’ SocioBiz platform, with the tagline “Empowering Communities through Entrepreneurship”, targets individuals seeking to raise funds to start or expand a business, or learn a new life skill to earn a sustainable livelihood.
Ethis will be taking part in the SC’s flagship investor education fair InvestSmart Fest 2019.
The event will take place between 18 and Oct 20 at Mid Valley Exhibition Centre.
The SC said the event is to educate members of the public to learn about the various investment opportunities and understand how to protect themselves against investment scams or illegal investment schemes.