Crowdfunding Regulatory

Framework in Malaysia

| Hu Xiao Hui | Khaidar Jamilah | Nabela Hapsari | Yekti Mahanani |

 What is 05
Conclusion
crowdfunding?
01 04
Issues and
What is Equity Challenges
Crowdfunding?
02 03
SWOT Analysis
Introduction
Definition

Oxford Advanced Learner’s Dictionary

The practice of funding a project or venture by raising many small amounts of money from a large number of
people, typically via the internet

Merriam-Webster’s Dictionary
The practice of obtaining needed funding (as for a new business) by soliciting contributions from a large
number of people especially from the online community
Source: California Management Review
 Equity Crowdfunding Cycle: Equity Can’t give investment advice.
platform usually charge companies a fee Highlight investment risk/prevent fraud.
Tracks when target amount is received
(typically 5-8%) to the amount raised

SC Registered

Start-Up
Small/Medium enterprise
Required to disclose detailed info Shopisticated investors: No restriction on investment amount
about company, offering, structure, Angel Investors: A max. of RM500.0000 within a 12-month period
Retail investors: A max. of RM5,000 per issuer with a total amount
valuation & risks
of not more than RM50,000 within 12-month period
Source: capitalmarketsmalaysia.com
Regulation of Equity Crowdfunding in Malaysia
Major ordinance(s)
Regulation of platform operators
Prospectus requirement
Dedicated disclosure/reporting requirements on
issuers
Limit on capital raising from the public by a
company
Investment ceiling on retail investor in any 12-
month
CMSA 2007
Guidelines on Recognized Markets SC-GL/6-2015 (R1-
2016)
Registration and licensing by SC Malaysia is needed
May advertise to public but ONLY via ECF platform
Yes. Operator must disclose and display prominently on its
platform (Chapter 12 , item 12.25)
RM 3mn to RM 5mn + micro funds
Sophisticated Investor: No restriction on investment
amount
Angel Investor: A max of RM 500,000 within 12 month
Retail Investor: Max of RM 5k per issuer with total amount
of investor, no more than RM 50k within 12 month
(item 12.26)
Islamic Equity Crowdfunding in
Malaysia?
SWOT Analysis
 STRENGTHS (+)
•
•
•

WEAKNESSES (–)
• There is no clear regulation for islamic crowdfunding
•
•

OPPORTUNITIES (+)
•
•
•

THREATS (–)
•
•
•

EQUITY CROWDFUNDING REGULATORY FRAMEWORK SWOT ANALYSIS

Issues and Challenges
• Current legal system lacks appropriate regulations and the Islamic Shariah
governance frameworks for the Islamic equity crowdfunding in Malaysia
• Needs special effort because the whole concept of equity crowdfunding is
fairly new in Malaysia
• The most critical challenge that always faces by crowdfunding is fraud
(crowdfunding)
• Around 40% of the total Malaysian population are internet users (CIA, 2015),
competency in information and communication technology ICT will continue
to become of the hindrance in the growth of crowdfunding
Suggestion
• Shariah parameters should be issued by the regulators to allow crowdfunding
activities to be run on the basis of Shariah principles. That return of Islamic
crowdfunding based on Shariah contract such as Qard, Istisna’,Murabahah, Ijarah,
Salam, Mudharabah, Musharakah, Wakalah and Bay Al-Dayn.
• Educating and promoting the public on the concept of crowdfunding, because the
level of public awareness on crowdfunding in Malaysia is generally low.
• SC must consider to propose new regulation for crowdfunding, from charity to equity
• More effort need to be undertaken to increase the internet usage among Malaysians
which eventually boost the growth of crowdfunding industry.
 Conclusion
The provisions of the Guidelines on Recognised Markets are to be revisited and
additional adjustments should be incorporated to strengthen the Shariah
governance aspects of the Islamic equity crowdfunding in the country. This is
pertinent since Shariah-compliant transactions run based on the nature of the
Shariah contracts involved