Mobilising Private and Philanthropic Capital via the Social Exchange

Enhancing the Social Finance Ecosystem in Malaysia

On 28 May 2024, Prime Minister Dato’ Seri Anwar Ibrahim officially announced the establishment of Malaysia’s first Social Exchange at the GFIEF. This significant development underscores the government’s commitment to fostering social innovation and addressing pressing societal challenges through collaborative efforts.

The SC proudly spearheads this groundbreaking initiative, marking a significant step towards enhancing the social finance ecosystem in Malaysia. This innovative fundraising platform is the first regulator-led initiative of its kind in the country, aimed at driving impactful social change by facilitating the flow of private and philanthropic capital into impactful projects that deliver positive social outcomes and foster sustainable development. This initiative not only demonstrates the SC’s commitment to social innovation but also sets a precedent for collaborative efforts in addressing societal challenges.

Aligning with Ekonomi MADANI Aspirations and Sustainable Development Goals

The establishment of the Social Exchange is expected to foster collaborative solutions and empower societal development, aligning seamlessly with the aspirations of the Ekonomi MADANI framework aiming for a just, equitable, and sustainable economy. This initiative reflects a strategic move to integrate social finance mechanisms into Malaysia’s broader economic development plans, promoting shared prosperity and social justice.

In addition, the Social Exchange focuses on funding eligible projects that encompass diverse themes aligned with the United Nations Sustainable Development Goals (SDGs). By aligning with these global goals, the Social Exchange aims to create meaningful impact on communities and contribute to Malaysia’s sustainable development agenda.

Key areas include:

Formation of an Advisory Committee

To ensure the effectiveness and success of the Social Exchange, the SC established an Advisory Committee led by the SC Chairman. The Committee comprises members with relevant backgrounds and represents institutions identified as key enablers for the initiative. The Advisory Committee is expected to:

Mitigating Systemic Risks And Promoting Financial Stability

Enhanced Risk Governance Framework

In 2021, the SC-wide risk governance framework was enhanced as part of an overall initiative to have an effective integrated and predictive risk surveillance to maintain regulatory agility.

The structured risk governance framework integrated the wider spectrum of risks such as technology, cyber and conduct risk at the SC’s Systemic Risk Oversight Committee (SROC) and Accounting, Market and Corporate Surveillance Committee (ACMS).

Intensified surveillance

The SC continued to intensify its surveillance of systemic risk to maintain market resilience and stability. Regular SROC engagements were held to deliberate concerns emanating from various segments across the capital market. Domestic equity and bond market, foreign fund flows and trade participation continued to be monitored closely for potential stress points.

In addition, measures and economic stimulus packages introduced by the government to weather the impact of COVID-19, market trading conduct and the financial position of listed companies were among the focus areas for discussion.

Thematic assessments

The SC also conducted thematic assessments covering investors’ fund flows, the position of firms, and policy decisions to ascertain the possible impact on the capital market. In 2021, the SC reviewed and enhanced its crisis indicators on potential emerging risks in the
capital market.

The enhanced crisis indicators provided a reference point for escalation to SROC when the identified indicators and triggers materialised and ensured prompt response to manage and prevent any issues of concern that might lead to a systemic crisis.

Joint regulatory discussions

In 2021, the SC conducted frequent joint regulatory discussions with other authorities such as Bank Negara Malaysia (BNM) and Labuan Financial Services Authority (Labuan FSA) to identify systemic risk concern areas within the financial and capital markets in Malaysia.

Monitoring of various components of the capital market

The SC continued its efforts to undertake a methodological and integrated approach to ensure any potential systemic risk was being monitored, mitigated, or managed. Figure 1 highlights the findings from the following risk assessments on the various components of the capital market.