Image credit: Funding Societies
KUALA LUMPUR: Funding Societies Malaysia plans to ride on rising demand for Shariah-compliant financing options, particularly in the business sector, and will offer a broader range of financing products to meet the needs of unserved and underserved small and medium enterprises (SMEs).
The SME fintech funding platform, operated by Modalku Ventures Sdn Bhd, launched its first Shariah-compliant trade financing product in May last year, with an encouraging take-up rate.
"This year, we have expanded our suite of Islamic financing products to cater to the various segments of micro SMEs and their varied business needs.
"Similarly, we are also looking to expand our investment products to include Shariah-compliant investment notes," Funding Societies Malaysia country head Chai Kien Poon told The New Straits Times.
He said that as of 2022, there is an estimated RM90 billion financing gap among micro SMEs in Malaysia.
This presents a sizable business opportunity for Funding Societies Malaysia in providing a more accessible and streamlined way for micro SMEs to obtain financing, leveraging on faster application processing, cash flow, a data-based credit underwriting approach, and customisable (mainly unsecured) nature of its products.
"Because micro SMEs' needs extend beyond financing, we began offering solutions beyond lending, such as payments and collections, which started in Singapore and extended to Malaysia and Indonesia," Chai said.
To note, Funding Societies Malaysia has disbursed more than RM2 billion in financing to underserved creditworthy local micro SMEs since its inception in Malaysia in 2017.
Regionally, the fintech platform has disbursed over US$3 billion (RM13.4 billion) across more than 5.1 million business financing transactions, benefiting almost 100,000 underserved creditworthy micro SMEs.
Moving on, Chai said Funding Societies Malaysia would continue to anchor Malaysia as its key market as the platform expands its presence across the region.
He said the key success factors in Malaysia include scaling supply chain financing in partnership with corporates and technology, growing its Islamic financing portfolio, rolling out payment solutions for small and medium enterprises (SMEs) and continuing partnerships with institutional funders and the government to fund creditworthy but underserved SMEs.
Chai noted that since its introduction, digital financing, including peer-to-peer (P2P) financing, has continued to rise, with a growing number of micro SMEs turning to digital platforms as an important source to obtain capital.
According to the Securities Commission's Annual Report 2022, P2P financing platforms have collectively fundraised RM3.87 billion, contributing to a fourfold increase in digital financing reach for micro SMEs.
Further, Chai said the introduction of five digital banks in 2021 will likely accelerate further growth of digital financial services.
"By adopting a platform model for SME digital financing, Funding Societies Malaysia is open to partnering with digital banks to accelerate financial
inclusion in Malaysia.
"Funding Societies have invested significantly in partnerships with digital platforms such as Carsome, Foodpanda, Lazada, Food Market Hub, EasyParcel and more, and our digital marketing has enabled us to reach out to more micro SMEs.
"Besides that, there is also an increased traction of Islamic fintech in Malaysia, with digital financing platforms offering Shariah-compliant financing options for SMEs and investors," Chai said.
Earlier this week, Funding Societies Malaysia and Credit Guarantee Corporation Malaysia Bhd (CGC) signed an SME Portfolio Guarantee (SME PG) agreement with the mutual objective of propelling the growth of Malaysian SMEs by providing easier access to financing.
Through the partnership, Funding Societies Malaysia and CGC are extending the first tranche of financing up to RM10 million under the SME Portfolio Guarantee Scheme via Funding Societies Malaysia's digital financing solutions to benefit the underserved and unserved yet creditworthy micro SMEs.
The partnership also marks the first strategic collaboration between CGC and an SME digital financing platform.
Under this scheme, eligible SMEs can apply for financing between RM50,000 and RM500,000.
Funding Societies Malaysia co-founder and group chief executive officer Kelvin Teo said the SME Portfolio Guarantee Scheme would widen access to financing facilities for underserved and unserved SMEs in Malaysia.
"Our financing would support SMEs to expand or sustain their operations, particularly as they bounce back in resilience post-Covid.
"As for our investors, the SME Portfolio Guarantee Scheme also lowers the risks of non-repayment by SMEs," he said.
Source: https://www.nst.com.my/business/2023/04/902312/funding-societies-riding-wave-islamic-financing?utm_source=nst&utm_medium=mostpoplatest