Crowdfunding Creates New Opportunities In Malaysia

Author:Mr Calvin Chan
Profession:TMF Group

Attention small businesses and start-ups: your time has come! With Malaysia leading the way in crowdfunding regulation, it's becoming easier and easier to get funding for your business.

Malaysia was the first country to regulate the growing industry to support new ideas by providing a funding mechanism. Its Securities Commission (SC) has approved a total of 12 crowdfunding platforms - six equity-based and six peer-to-peer (P2P) lending - and, though there are strict guidelines for operation, the market is creating new avenues for entrepreneurs. It's all part of advancing the financial services sector in the country, and equity crowdfunding is seen as one of the ways to enable more firms to raise growth capital and unleash innovation.

What is crowdfunding?

At its most simple, crowdfunding is a new way to raise funds for business or philanthropy. It has made obtaining finance more equitable. Previously, the only source of funds were bank loans, angel investors, venture capitalists or loans from family and friends. The funds in crowdfunding originate from individuals; equity crowdfunding allows you to invest in a company, working like a conventional investment in shares, while P2P lending allows you to lend money to people or businesses that will repay the cash plus interest over the term of the loan.

And with Malaysia leading the way in regulation and inspiration, it's no wonder the country is seen as a sweet spot for crowdfunding operations. It's even spawning local sites, such as Crowdo and Crowdplus.

There's another reason why Malaysia is proving so popular for crowdfunding; it's a leading destination for Islamic finance, and there are few crowdfunding sites that comply with Shariah financial needs.

Regulation - a barrier to investment?

Growing regulation of the crowdfunding industry is not putting off investors; Malaysia as a whole is one of the least complex jurisdictions in Asia, according to TMF Group's inaugural Financial Complexity Index. In order to determine the rankings, TMF Group surveyed its in-house accounting and tax experts and used four weighted complexity parameters to evaluate the accounting and tax rules and regulations in different jurisdictions, and risks associated with non-compliance.

The ranking of 94 jurisdictions across the world resulted in three top-10 spots for Asia Pacific: Vietnam ranked 5th most complex for compliance, followed by China at 7 and India at 10.

But there was a large chunk of southeast Asia...

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