News & Events

Funding Societies Expands Financing Offerings For MSMEs Via Islamic FinTech (iFinTech) Facilities

Kuala Lumpur – Funding Societies, the largest SME digital financing platform in Malaysia and Southeast Asia, introduces its Shariah-compliant trade financing solutions based on Commodity Murabahah (Tawarruq) for credit worthy and underserved Malaysian micro, small, and medium enterprises (MSMEs) seeking to grow their business or expand their working capital as the country reopens its economic sectors and transitions to an endemic phase.

Wong Kah Meng, Co-Founder and Chief Executive Officer of Funding Societies Malaysia, remarked “Despite their encouraging business performance, MSMEs have limited access to financing and are underserved for various reasons (some of the main factors include low to zero credit track record, lack of assets to pledge, and lack of financial documents for credit assessment). This trend was further exacerbated during COVID-19. Due to social distancing norms and limitations in meeting customers face to face, it became difficult for traditional financial institutions to provide loans to SMEs, notwithstanding stricter requirements in certain industries or products due to heightened risk.”

“During the pandemic, we observed many enterprising Malaysians have taken to digital platforms and marketspaces to start, sustain or even expand their business. This can be seen from the increase in search traffic and number of SMEs we have onboarded through digital channels across both digital and offline economies,” Wong added.

In an interview with BERNAMA in April, Sharifatul Hanizah Said Ali, Securities Commission’s Islamic Capital Market Development Executive Director, stated that it expects a greater adoption of digitization and technology to broaden and accelerate the capacity for stakeholders t0 enhance the Islamic finance ecosystem. These digital solutions would facilitate connectivity by allowing issuers, investors, and intermediaries to access existing and new markets more efficiently and cost-effectively.

Increasingly MSMEs recognize the importance of utilizing FinTech and Islamic FinTech (iFintech) to gain access to capital to ensure continuous operationalization and expansion of their business activities. The introduction of Shariah-compliant financing complements Funding Societies’ existing broad range of financing products to serve creditworthy SMEs of all segments, vintages, and sizes, including those operating in the Halal industry.

Furthermore, iFintech is growing briskly amidst concerns of global economic slowdown following general sluggish markets and cautious consumer sentiments in the United States as well as Southeast Asian economies like Malaysia and Singapore. In 2021, the Malaysian iFinTech market was estimated to be valued at USD3.0 billion (RM13.18 bilion). Malaysia is categorized as a ‘market leader’ on the iFinTech Hubs Maturity Matrix with high growth and a high conduciveness. The country comes first on the Global Islamic FinTech (GIFT) Index.

“This represents an encouraging opportunity for both SMEs and investors. The gradual pick-up in economic activities and reopened borders coupled with anticipated elevated consumer confidence would translate into a more optimistic outlook as a whole. However, we need to maintain a cautious approach as various markets have raised interest rates in an attempt to rein in inflationary pressures, risking an economic slowdown,” Wong concluded.

In ensuring compliance with Shariah principles, Funding Societies partners with Masryef Advisory, a registered Shariah advisory company with the Securities Commission as its Shariah advisor.

“Funding Societies took a great step to also offer Shariah-compliant products that benefit both Muslims and non-Muslims investors to invest in its platform. In addition, the underserved MSMEs can now have greater access to Islamic financing through the platform. We are proud to be part of Funding Societies’ journey into Islamic financing. Funding Societies has obtained  Shariah-compliant certificate from Masryef which would enable them to also offer Islamic financing solutions to the users,” said Khairil Anuar Mohd Noor, Principal at Masryef Advisory.

Funding Societies’ Shariah-compliant trade financing solutions enable Malaysian MSMEs who have been operating for at least a year to access zero collateral financing and a credit line of up to RM1 million. For more information on Funding Societies Malaysia’s Islamic Financing, please visit https://fundingsocieties.com.my/islamic-financing.