OPENING REMARKS BY YANG BERBAHAGIA DATUK SYED ZAID ALBAR
Yang Berhormat Tuan Lim Guan Eng,
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| 1. | On behalf of Securities Commission Malaysia, it is a pleasure for me to welcome you to the Fintech Roundtable. |
| 2. | This event brings together a diverse group of stakeholders, including policymakers as well as various segments of digital market participants. I hope that this rich mix of perspectives will contribute to on-going discourse on digitisation in the capital market. In holding this Roundtable, the SC also hopes to foster further dialogue and greater alignment between policy thinking and market practice. |
| 3. | This morning, we are privileged to host Yang Berhormat Tuan Lim Guan Eng, Minister of Finance Malaysia. |
| 4. | Yang Berhormat, thank you for accepting our invitation and for agreeing to deliver the special address. We believe that this Roundtable is an important platform to showcase the various ways in which the capital market has harnessed technology to provide innovative financing and investment solutions. |
| 5. | At the same time, it is also an opportunity for the industry to benefit from your insights on fintech as well as the government’s aspirations in this area. |
Ladies and gentlemen, |
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| 6. | As a regulator, it is important to the SC that the capital market is as effective as it is secure. An effective capital market is one which is:
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| 7. | The true test of a capital market, therefore, is its ability to serve the real economy. If you strip away the bells and whistles, the capital market is nothing more than an avenue through which capital is sourced from investors and directed into productive ventures. |
| 8. | However, for a market to do this well, it must be able to do a number of things. First, it must be able to sift through various competing ventures and identify those which merit financing. Second, it must be able to evaluate and price the associated investment risk. Third, it must be able to aggregate capital from, provide disclosures to, and generally interface with a diverse and geographically dispersed pool of investors. Moreover, these processes must be as efficient as possible, to ensure that intermediation costs do not outweigh potential returns on investment. |
| 9. | While markets have traditionally relied on intermediaries to perform these functions, advances in technology and analytics have since tilted the playing field towards dis-intermediation. In other words, the digitisation of finance has made capital markets easier, faster and cheaper to access – both for issuers as well as investors. |
| 10. | This is certainly a welcome development, and the SC believes that there is a place for digital business models in the Malaysian capital market. The presence of all of you (in this room) is evidence of our commitment towards developing this segment. However, this must be subject to the bounds set by a transparent and well-regulated ecosystem, to ensure that innovation does not come at the expense of market integrity and investor protection. |
Broadening access to financing by MSMEs |
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| 11. | One particular segment where digitisation has made an impact is the financing of micro, small and medium-sized enterprises. Despite being a vital component of the Malaysian economy, MSMEs are traditionally under-served by the financial system. |
| 12. | The introduction of equity crowdfunding and peer-to-peer financing has since helped to narrow this gap, by providing an alternative source of capital for MSMEs to fund business expansion, finance working capital and meet other financial requirements. I am pleased to report strong progress in this area, with ECF and P2P financing platforms having collectively raised RM344 million benefiting close to 900 MSMEs as at March 2019. |
| 13. | To illustrate how ECF and P2P financing have opened an opportunity for smaller businesses to access market-based financing, consider the fact that almost half of ECF issuers raised RM500,000 and below, while 67% of P2P financing issuers raised RM50,000 and below. |
| 14. | Moreover, these campaigns were funded by more than 10,000 investors – 83% of whom are local and retail investors. Approximately 53% of the participating investors are also aged below 35, thus demonstrating the potential of this segment to attract a new demography of investors into the capital market. |
| 15. | Given the importance of bridging the financing gap for MSMEs, we acknowledge the government’s effort in allocating RM50 million towards an ECF and P2P financing co-investment fund alongside private investors. |
Ladies and gentlemen, |
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| 16. | The sustained level of interest shown in this segment is indicative of strong demand for more platform operators. As such, this morning the SC will be announcing the registration of three new ECF platform operators and five new P2P financing platform operators. |
| 17. | Each operator aims to provide a differentiated value proposition, and will target various sub-segments including shariah-compliant issuers to meet growing investor demand for a shariah-compliant asset class, as well as technology-based companies and creative arts. |
| 18. | Meanwhile, the new P2P financing platforms will be targeting issuer segments such as MSME suppliers to multinational corporations, businesses looking to finance machinery and equipment, as well as entrepreneurs seeking microfinancing. Products offered by these newly-registered platforms also include insured trade invoice financing and insurance premium financing. |
| 19. | We hope that the registration of these new platforms will help to further broaden the ECF and P2P financing market segments, and enable healthy competition while meeting unmet demand from both issuers and investors. |
Ladies and gentlemen, |
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| 20. | In addition to broadening access to financing, digitisation has also been an important tool in enhancing investor experience. This may include ease of access to investment information, and the ability to obtain capital market products and services at a lower cost. |
| 21. | Participants of today’s roundtable, for example, include firms operating in digital investment management, a digital-only equities broker as well as a digital platform for unit trust and bond distribution. By harnessing technology, these players have been able to reduce the costs of providing their services and consequently lowered the barrier to access for investors. Malaysia’s first licensed digital-only broker, for example, has opened more than 30,000 accounts since it began operations two years ago, with new-to-market investors accounting for a significant portion of this headcount. |
| 22. | In the 2019 Budget announcement, the Government stated that it intends to leverage technology-enabled and innovative mechanisms to provide an alternative funding source for first-time homebuyers, through a property crowdfunding scheme. |
| 23. | The SC is supportive of ideas that utilise technology to benefit investors by democratising access to investments while broadening financing options available for Malaysians. As such, we are pleased to announce that we have revised our Guidelines on Recognised Markets today. The revised guidelines will introduce new requirements to facilitate property crowdfunding. |
Conclusion |
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| 24. | Before I conclude, I would like to reiterate that today’s Roundtable is an important opportunity for market participants and policymakers to enrich our collective understanding through dialogue. Moving forward, I believe that market development should be a joint endeavour, with “ownership” and momentum from both parties collaborating in bringing about positive change. |
| 25. | On that note, I would like to bring my remarks to a close, and I look forward to a productive Roundtable. |
| Thank you. | |
