SC’s game changing funding options for SMEs

By Sharon Chang

The coronavirus is predominantly a global tragedy, not only affecting hundreds of thousands of people, but also having a growing impact on the world economy.

Businesses in Malaysia have plummeted tremendously which led the Securities Commission (SC) to come up with further relief options for companies in its commitment to ensure continued access to fundraising.

Datuk Syed Zaid bin Syed Jaffar Albar, Chairman of Securities Commission Malaysia

The SC chairman Datuk Syed Zaid Albar said during a virtual conference on the SC Annual Report 2019, that proactive measures are required to facilitate greater access to funding in order to maintain confidence and ensure long-term recovery of the market.

In response to the increased interest by small and medium enterprises (SMEs) to tap into alternative funding channels, the commission lifted the funding limit on equity crowdfunding (ECF) platforms to RM10 million, and allowed ECF and peer-to-peer financing (P2P) platforms to operationalise secondary trading with immediate effect.

“The raising of the limit to RM10 million will also enable bigger companies to use ECF for fund raising,” Dr V. Sivapalan, Co-Founder and Senior Partner of Scaleup Malaysia Accelerator and Co-Founder of Proficeo Consultants tells Business Today, adding that startups can also utilise this as a substitute for Series A fund raising especially if venture capitalists (VCs) become more cautious

According to Syed Zaid, there is still demand from issuers to raise funds, but investors are hesitant. Hence, to  address this the government’s Co-Investment Fund (MyCIF), administered by the SC, has increased its funding matching ratio from 1:4 to 1:2 for eligible ECF and P2P campaigns.

This means that the ECF issuers/promoters will need to raise less money from external investors to reach their funding targets.

However, this will run from now until September 30, 2020.

Sivapalan applauds the SC’s positive announcement, he says that the MyCIF ratio increase is excellent as it decreases the risk of ECF investors while assisting issuers in speeding up their fund raising.

“This is a vey proactive policy approach especially during this period where conditions remain volatile, he says.

Lastly, Sivapalan tells Business Today that he hopes the secondary trading of ECF shares which was proposed earlier but has yet to be executed, will be expedited as it will provide liquidity for ECF investors.

The SC assured investors that the Malaysian capital market remained fundamentally strong and was functioning in an orderly manner.

“Over the years, Malaysia has withstood many crises and the SC has worked closely with the industry to strengthen the capital markets and address systemic weaknesses.”

 

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