Short Position - Syariah boost for SMEs, tin-talising prospect

Syariah boost for SMEs

AN easy-to-use syariah compliance toolkit for unlisted micro, small and medium enterprises (MSMEs) and crowd-funding platforms is a welcome and timely move.

Becoming syariah-compliant takes some effort for companies which have not addressed it before.

Larger corporations are in a better position to hire consultants or even use their highly-paid bankers to advise them on this.

For smaller businesses, the toolkit – probably the first such feature in the world – is an easy and quick fix.

There is a growing interest globally toward Islamic finance and in this respect, syariah-based funding remains hugely untapped.

Malaysia is already a world leader in sukuk issuances.

Moody’s Investors Service, in a recent report, notes that Malaysia’s total sukuk issuances in 2020 contributed 32% to the global sukuk issuances, amounting to US$65.6bil (RM276.57bil). This was followed by Saudi Arabia at 28%.

This tool kit, introduced by the Securities Commission (SC) (pic) will primarily benefit equity crowdfunding (ECF) and peer-to-peer (P2P) financing platform operators, as well as syariah advisers.

It is a major initiative by the regulator to provide guidance in screening the syariah status of unlisted MSMEs, which are the backbone of the Malaysian economy.

Interestingly, despite the uncertainties due to Covid-19 last year, the total amount raised by investors was more than 5.5 times for ECF and 1.2 times for P2P platforms compared with the previous year, SC chairman Datuk Syed Zaid Albar had noted.

Malaysia is also the leading global halal hub with yearly export value making up a substantial portion of the total exports for the country.

With Malaysia’s halal economy projected to grow to US$113.2bil (RM477bil) in 2030, there are huge opportunities to be tapped for MSMEs.

The determinant of good or bad

THE value of a country’s currency says a lot more than what it is able to purchase, how much confidence there is in the local unit or even just how competitive its value is in relation to its competitors.

The value of a country’s currency is the denominator of how well, or bad, things have been for a country over a period of time.

For the ringgit, how the local currency has fallen against many of its regional competitors over the past 10 years is symptomatic of the problems economically and structurally the country has been facing over the years.

All currencies basically appreciate if economic conditions are overall favourable in a country.

Ringgit dollar currencyRinggit dollar currency

In Malaysia’s case, the broad and steady fall of the ringgit over the past decade against its regional peers is an indication that not all is well economically for the country.

And how those other countries are catching up to Malaysia.

Yes, there was a period when the price of crude oil shot north of US$100 (RM422) a barrel and the ringgit saw a big rise in its value against regional peers.

But since the fall in the price of crude oil, and the ongoing economic issues in the country, the ringgit has regressed in value.

The question of using the “competitiveness” of a currency just so exports stay competitive is now a long-used argument that holds less credibility with each passing year.

The problem is that without a strengthening currency, there is little urgency for businesses and industries to innovate. And as other countries see their currencies progress, the relative “competitiveness” of the ringgit will set up other socio-economic indicators.

The purpose of keeping a currency relatively competitive serves little interest if everything is geared to maintain things how they are.

Every country needs progress, from economically to societal, for overall benefit to flow to every level.

A tin-talising prospect

EARNINGS season has been one fantastic financial result after another, courtesy of the low base effect from last year. Amid the various blowout numbers, Malaysia Smelting Corp Bhd too, reported a multi-fold increase in its profit from a year ago.

In its outlook, the tin smelter says tin prices continue to trend upwards, lifted by continued demand for tin solder in consumer electronics, and supply disruptions due to lockdowns in tin producing countries around the world (Malaysia included), voluntary production cuts in Brazil and Indonesia, and political turmoil in Myanmar.

The outlook for tin demand is promising from its continued use in semiconductors, electronics, home appliances, photovoltaics, automotive, and lithium-ion batteries.

MSC tin smeltingMSC tin smelting

Tin has certainly found favour as the electronics sector move away from lead free solders and tin has been the biggest beneficiary.

With electronics usage skyrocketing in many facets, so has been the use of tin in the industry.

There is now literature that the use of tin may improve the performance of lithium-ion batteries but some suggest the increase of 60,000 tonnes will happen in 10 years.

The thing the tin industry has going for itself is that supply is not so easy to come by and some of the larger tin players may find difficulties in extracting the large quantities of tin needed

The good news is that there is an industry that will need a large amount of tin in the future, but its certainty is still left to be seen.

The issue with battery technology is that it is still evolving and there is no telling what the technology will look like in a decade and what will then be the mineral requirements to produce more effective batteries.

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