As the demand for digital and online services grew, the capital market continued to witness encouraging growth via digital innovation and the introduction of new business models; allowing intermediaries, businesses and investors to benefit from accessibility, efficiency, transparency and convenience.
Since their inception, new alternative financing platforms such as ECF and P2P financing have benefitted more than 4,000 MSMEs, with total funds raised at RM2.7 billion. While still relatively small in size, these alternative financing avenues had grown to become a viable source of financing for MSMEs, increasing their reach to small and emergent companies.
In particular, ECF and P2P financing had helped to address the financing needs of MSMEs during the pandemic, as both markets had raised more than RM1.8 billion since the start of the MCO in 2020.
As part of a continual evolution of the ECF market, several initiatives were introduced in 2021 to serve the needs of a wider range of businesses and spur market growth:
ECF fundraising limit raised from RM10 million to RM20 million
List of eligible ECF issuers expanded to include unlisted public companies
1st Microfund approved to be hosted on ECF platform
Catalysing access to financing via MyCIF
Since its establishment in 2019, the Malaysia Co-Investment Fund (MyCIF) has received RM180 million in allocation from the government for co-investment with private investors through ECF and P2P financing platforms. To date, MyCIF has successfully co-invested over RM357 million in more than 16,000 ECF and P2P financing campaigns, benefitting 2,280 MSMEs. The fund had co-invested alongside more than RM1.36 billion from private investors.
Separately, an additional RM5 million had been channelled to MyCIF to co-invest in Social Enterprises. MyCIF-Social Enterprise Scheme (MyCIF-SE) was operationalised in 2020, when MyCIF began co-investing in P2P financing campaigns involving social enterprises accredited by the Ministry of Entrepreneur Development and Cooperatives (MEDAC). The co-investments were on a 1:1 basis where MyCIF would forego its share of interest/return to reduce the cost of financing for social enterprises.
MyCIF has benefitted businesses of different sizes in various sectors. These included tech-enabled platforms and brick-and-mortar businesses that required financing for business expansion and working capital.
Providing new fundraising avenue through IEO platform
Following the introduction of the regulatory framework governing digital token offering through the IEO platform, the SC opened the application for prospective IEO operators to register as an RMO, with encouraging interest from potential applicants. Regulatory assessments on IEO operators are underway. These assessments are paramount to ensure that all operators registered with the SC have the necessary systems, competencies, and ability to objectively undertake a comprehensive due diligence process on potential issuers.
Since introducing the DAX framework in 2019, the SC had registered four DAXs, namely Luno Malaysia Sdn Bhd, SINEGY Technologies (M) Sdn Bhd, Tokenize Technology (M) Sdn Bhd, and MX Global Sdn Bhd.
Despite market uncertainties following the pandemic, the domestic digital asset market had continued to grow, with approximately RM21 billion in digital assets traded across all registered DAXs in 2021. It continued to garner investors’ interest as the total number of investment accounts grew by close to 300% to approximately 760,000 in 2021 (2020: more than 190,000). Investors aged below 35 years comprised the largest segment at 62%, holding more than 470,000 accounts as at end 2021.
The SC continued to facilitate the introduction of new digital assets to be traded on DAX, with the approval of Bitcoin Cash (BCH) in March 2021 as an additional permissible digital asset. The other digital assets permitted to be traded on DAX include Bitcoin, Ripple, Ethereum, and LiteCoin.
In line with the approach of facilitating new market structures for trading, distribution, and hosting of capital market products, the SC registered a RMO-General to operate an interbank trading platform for repurchase agreements and reverse repurchase agreements. In the e-Services segment, two newly registered RMO were given concurrence to operationalise as e-Services Platforms (RMO-eSPs).
The market saw the emergence of another digital-only broker in 2021. Digital brokers have gained traction from the growing number of retail investors using online brokerage accounts. The increased retail interest in the equity market during the pandemic had also pushed digital brokers to new highs, gaining a retail market share of 5.45%2 with total number of accounts having risen by more than 50% to approximately 251,000 in 2021 [2020: more than 165,000]. Millennial investors comprised the majority of the clientele base.
The digital investment management (DIM) segment continued to expand its capital market offerings to address the investment needs of the emerging digital generation of investors. The segment had grown in an upward trend over the years, with a total AUM of more than RM1 billion as at end 2021. An additional DIM company was licensed in 2021, bringing a total of eight DIM companies currently in operation.
The DIM segment had managed to attract and serve the younger demography of investors, with more than 70% of participating individual investors in DIM comprising those aged below 35 years and attracting the participation of first-time investors. The emergence of spare change investing, where spare changes from investors’ purchases are rounded-up and invested into funds, had also allowed investors to begin investing with small investment amounts with ease.
2This refers to the digital brokers’ retail trading value as a proportion of the entire brokerage industry’s retail trading value
As part of the Asia-Pacific Economic Cooperation (APEC) initiatives, the SC developed and hosted a virtual Crowdfunding Workshop from 17 to 19 August 2021. Originally planned as a physical event during Malaysia’s APEC Chairmanship in 2020, the Workshop supported Malaysia’s APEC 2020 priority of having more inclusive economic participation through digital economy and technology and garnered over 130 participants from 16 APEC economies.
The Workshop explored the fundamentals of crowdfunding and the different regulatory frameworks applied by various jurisdictions, regulators’ experiences in developing their respective crowdfunding regimes, and the issues and challenges of market participants within the crowdfunding ecosystem.
