Announced last week, the Securities Commission Malaysia revealed updated regulations as well as the approval of 8 new “Regulated Market Operators” serving the investment crowdfunding – peer to peer financing market. Included in the list of approved platforms of the first Islamic Equity Crowdfunding license, was Singapore based Ethis Group.
Via their Malaysian subsidiary, Ethis Ventures, the company is poised to offer alternative finance services in Malaysia. Perhaps best known for its impact investing in Indonesia, Ethis launched last year its “Global Sadaqah platform,” which has since formed partnerships with Islamic banking players.
Ethis notes that while there is a growing number of Islamic P2P platforms globally, there are still very few Islamic equity crowdfunding platforms in operation.
In Malaysia, the new platform, named Ethis Equity, expects to launch in Q1 2020.
Ethis Group Chief Investment Advisor Maritz Mansor said they are very excited to have this chance to open up a new asset class to all levels and types of investors. Mansor said that currently in the majority of markets most funding comes from institutions and sophisticated investors. He explained that their minimum investment will be 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,” commened Mansor. “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.”
Umar Munshi, co-founder of Ethis Group and Managing Director of Ethis Ventures, said there is 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 Munshi. “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 RM 350m channeled to 900 SMEs already.”
Munshi said a Shariah-compliant alternative is missing, 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 added:
“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.”
Ronald Wijaya, the co-founder of Ethis Group and Managing Director of PT Ethis Fintech Indonesia said that 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.”