Funding Societies, the Singapore-based small and medium-sized enterprise (SME) digital financing platform, on Wednesday introduced its Shariah-compliant trade financing solutions based on Commodity Murabahah (Tawarruq) for creditworthy 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.

Funding Societies Malaysia Co-Founder and Chief Executive Officer Wong Kah Meng said in a statement that 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,” he added.

He also said that during the pandemic, he 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,” he added.

According to the statement, 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 $3 billion. 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 said.

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 MYR1 million ($227,531).

Funding Societies | Modalku is the largest SME digital financing platform in Southeast Asia. It is licensed in Singapore, Indonesia, and Thailand, registered in Malaysia, and operates in Vietnam.

The FinTech startup is backed by SoftBank Vision Fund 2, SoftBank Ventures Asia, Sequoia Capital India, Alpha JWC Ventures, SMBC Bank, Samsung Ventures, BRI Ventures, Endeavor, SGInnovate, Qualgro, and Golden Gate Ventures amongst others.

The FinTech company provides business financing to SMEs, which is funded by individual and institutional investors. In seven years, it has helped finance over five million business deals with over MY9.5 billion ($2.16 billion) in funding.

Masryef Advisory Sdn. Bhd. is a registered Shariah Advisory firm under Securities Commission Malaysia (SC) and a partner of Malaysia Digital Economic Corporation (MDEC). The firm has been offering consultancy and advisory services to over 30 clients for the past three years standing by over than 50 years of experienced founders and consultants.

Parallel to Malaysia’s aspiration as a leading global Islamic finance hub, Masryef has worked together with regulators, experts in the field and industry players. Masryef as a boutique advisory firm focused on Islamic FinTech and has been partner with most of the peer to peer (P2P), equity crowdfunding platform (ECF) and buy now pay later (BNPL) players.

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