Kuala Lumpur, 7 December 2020 – The trend to raise capital through equity crowdfunding (ECF), which has swiftly risen in popularity, poses a great challenge to the Leading Entrepreneur Accelerator Platform (LEAP) Market as a preferred fund raising platform.
Inter-Pacific Asset Management Sdn Bhd chief executive officer Datuk Dr Nazri Khan Adam Khan said ECF is a flexible platform that not just limited to technology-driven companies as it is designed for all as long as they have the right and transparent business model to woo investors.
As for the Leap Market, he believes the platform has a weak business concept due to its strict features with low liquidity, accessible only to sophisticated investors who might not be able to exit their investments as easily as in the ACE Market or Main Market.
He said the no-ready-seller and no coverage from market analyst (a catalyst to help investors address their investment), were also factors that influenced investors to shift away from the LEAP Market.
“Equity crowdfunding is a good platform, you can exit anytime and able to invest as low as RM500 which you can’t get such investment amount in Bursa Malaysia.
“The trend of equity crowdfunding is going to take off strongly,” he told Bernama, citing ECF has shown that Malaysia is at the front of crowdfunding as a financing option.
ECF is a virtual method to raise capital from the public through the sale of securities such as shares, convertible note, revenue share, debt, and others, in an early unlisted-private company.
Nazri Khan said ECF provides a better access to financing, especially for small and medium enterprises, micro businesses, as well as startups, which usually face difficulty in securing loans from the banks and financial institutions.
The COVID-19 pandemic has made the financial landscape even worse as financial institutions are becoming more stringent in lending money to borrowers, he said.
He said the percentage of new and small businesses getting loans from banks is relatively small, probably at 20 per cent, while the sources of funding for the rest of them are from family, savings, personal loans and even credit cards.
“Companies want to diversify without depending on the banks to get their funding and crowdfunding is growing traction. This will give pressure to the banks due to their strict criteria,” he added.
In Budget 2021, the government will be allocating RM50 million in matching grant for peer-to-peer (P2P) lending and RM30 million matching grant for ECF to encourage the alternative investment industry in the country.
Individual investors could enjoy a 50 per cent income tax exemption for their investments, capped at RM50,000 for each year of assessment.
-BERNAMA
