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Malaysia releases its first Islamic Equity Crowdfunding license

Malaysia releases its first Islamic Equity Crowdfunding license

Malaysia’s Securities Commission announced 8 ‘Regulated Market Operators’ for equity crowdfunding and P2P financing, including the very first Islamic equity crowdfunding license, awarded to Islamic fintech venture builder Ethis Ventures.

Ethis Ventures is the Malaysian arm of Singapore-based Ethis Group, a leader of Islamic property crowdfunding, best known for its impact investment campaigns focused on social housing projects in Indonesia. Last year it launched the Global Sadaqah platform, which has since formed partnerships with prominent Islamic banking players. While there is a growing number of Islamic P2P platforms globally, there are still very few Islamic equity crowdfunding platforms in operation. The new platform, named Ethis Equity, targets to launch in Q1 2020.

Ethis Group Chief Investment Advisor Maritz Mansor enthused, “We are very excited to have this chance to open up a new asset class to all levels and types of investors. In most markets, a majority of the investments flowing into Equity crowdfunding is from institutions and sophisticated investors. At the same time the minimum investment is low which means that ordinary people can invest alongside these professional investors.”

Notwithstanding the rise of Islamic finance, SMEs still struggle to raise growth funds, especially Shariah-compliant funds. Today there is also the resurgence of entrepreneurship in the Muslim world, which has been hindered by a distinct lack of Islamic venture capital and angel investment. Equity crowdfunding allows SMEs and startups to raise funds by issuing shares to the public, similar to how large companies issue shares when they get listed on the stock exchange. This model is a true Musharakah or Mudarabah relationship with shared risk and reward.

“There is so much potential for the growth of businesses and startups in the Muslim world, especially in Southeast Asia. Technology has opened up trade and commerce, as well as brought amazing access to education and learning new skills. What is missing is funding. I believe Equity Crowdfunding is the missing piece.” said Umar Munshi, co-founder of Ethis Group and Managing Director of Ethis Ventures.

The situation is similar in Malaysia, where SMEs and startups have few avenues for raising funds. In recent years, the introduction of licensed Equity crowdfunding and P2P financing players, categorised collectively as ‘Regulated Market Operators’, has brought positive early impact, with a total of RM350m channelled to 900 SMEs already. What is sorely missing is a Shariah-compliant alternative, a gap that Ethis Equity aims to fill. Awareness about Islamic finance is very high in Malaysia both among Muslims and non-Muslims, and Ethis expects the demand for its equity platform to be high.

Ethis Group chairman Datuk Mohd Radzif said, “SMEs are the backbone of the economy. Startups are the future challengers to the status quo. For Malaysia to continue to be a leading economy in the Muslim world and maintain its position as the top Islamic finance country, it must embrace and rapidly adopt Equity crowdfunding.” Datuk Mohd Radzif is no stranger to this space, as the former Group Managing Director of SME Bank, where he led the successful turnaround of the Bank, and the substantial conversion of its assets into Islamic assets.

Ethis Equity also plans to attract promising Islamic economy startups to setup and raise funds in Malaysia. Ronald Wijaya, the co-founder of Ethis Group and Managing Director of PT Ethis Fintech Indonesia adds, “Malaysia is the ideal base for the global Islamic digital economy. It has strong infrastructure, and is at the doorstep of emerging Indonesia, with the largest Muslim population in the world.”