More sup­port for al­ter­na­tive fi­nance de­vel­op­ment needed

New Straits Times - - Business -

KUALA LUMPUR There is sig­nif­i­cant room to sup­port the de­vel­op­ment of al­ter­na­tive fi­nance, such as crowd­fund­ing, peer-topeer lend­ing, pri­vate eq­uity and ven­ture cap­i­tal and asset-based lend­ing in Malaysia.

Bank Ne­gara Malaysia in its 2016 An­nual Re­port in­di­cated that in 2015, key al­ter­na­tive fi­nanc­ing amounted to RM3.3 bil­lion, com­pared with RM25.1 bil­lion in to­tal small and medium en­ter­prise fi­nanc­ing ap­pli­ca­tions that were re­jected by banks.

This sug­gested a fi­nanc­ing gap of RM21.8 bil­lion that could po­ten­tially be met by al­ter­na­tive fi­nance, said Bank Ne­gara.

Crowd­fund­ing and peer-topeer lend­ing lower search costs for lenders and bor­row­ers while pri­vate eq­uity and ven­ture cap­i­tal al­low for more aligned risk and re­turn ex­pec­ta­tions of fund providers.

Mean­while, asset-based lend­ing struc­tures take into ac­count the value-gen­er­a­tion ca­pac­ity of ref­er­ence as­sets and en­ables less cred­it­wor­thy bor­row­ers to im­prove cash flows by sub­sti­tut­ing their credit risk with that of more es­tab­lished cus­tomers.

These al­ter­na­tive fund­ing av­enues com­ple­ment Malaysian busi­nesses, where the trend in re­cent years has been for the de­ploy­ment of in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy in their op­er­a­tions.

Re­cently, Se­cu­ri­ties Com­mis­sion Malaysia li­censed six reg­is­tered mar­ket op­er­a­tors to op­er­ate eq­uity crowd­fund­ing plat­forms.

These plat­forms raised a to­tal of RM6.2 mil­lion in fund­ing for star­tups in 10 months.

Bank Ne­gara said the pro­vi­sion of al­ter­na­tive fi­nance that com­bined com­mer­cial and so­cial ob­jec­tives through waqf and other do­na­tion-based ar­range­ments to de­liver di­rect ben­e­fits to so­ci­ety was gain­ing trac­tion in the Is­lamic bank­ing sec­tor. Fran­cis Dass

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