SC sees private equity, venture capital as crucial part of funding ecosystem

PETALING JAYA: The Securities Commission Malaysia (SC) sees the inclusion of startups in the Penjana stimulus package last year and the launch of the MyDigital initiative earlier this month as a signal to the importance of venture capital and private equity firms as an important part of the funding ecosystem.

Its deputy chief executive, Datuk Zainal Izlan Zainal Abidin, said Penjana will provide a boost to the local startup ecosystem, while MyDigital articulates the vision of how Malaysia’s digital economy should be shaped in the next few years.

“These policies and announcements set a very clear tone that this segment is a priority for our country, which in turn suggests an opportunity for the venture capital and private equity industry as a significant amount of investments would be needed to spur the growth of this segment,” he told the media at the virtual launch of the SC 2020 Annual Report on Thursday.

Izlan said the two play a critical role in bridging the financing needs of businesses as they grow and expand from on stage to another.

“With this in mind, the SC is engaging with various stakeholders directly as well through the Malaysian Venture Capital and Private Equity Development Council, which we chair, to get feedback on what enhancements is required to ensure investments are channelled more efficiently in this space.”

He disclosed that the SC is looking at three primary areas – deal pipelines, talent development, and investor awareness and education.

According to the regulator’s annual report, venture capital and private equity saw a 41% decline in new investments to RM333.94 million from RM566.37 million in 2019.

SC chairman Datuk Syed Zaid Albar remarked that due to Covid-19, these firms focused their attention on ensuring business continuity of their portfolio companies and have taken a wait-and-see approach to new deals, especially in the early stages of the pandemic.

In 2021, Syed Zaid said, the SC’s priorities will centre on the developments in the industry as well as the needs of market participants, which entail the facilitation to embrace digitalisation that has accelerated due to the pandemic and the facilitation of greater fundraising for micro, small, medium and large entrepreneurs (MSMEs) as well as mid-tier companies, which is crucial for economic recovery.

Besides that, the SC will facilitate the growth of sustainable and responsible investments and the development of a taxonomy for the capital market to complement Malaysia’s national agenda and its transition into a low-carbon economy.

Syed Zaid said the regulator’s digital agenda, which kickstarted in 2010, has started to bear fruit as it is the first in the region to regulate equity crowdfunding (ECF) and peer-to-peer (P2P) platform.

Today, there are a total of 40 regulated fintech players in the Malaysian capital market and there has been impressive growth across various digital platforms.

“This has allowed MSME issuers to raise funds and investors can participate in the capital market via digital investment managers, ECF and P2P platforms, digital asset exchanges and online-only brokers.”

The SC’s chief regulatory officer, Foo Lee Mei, said the regulator’s focus is to develop MSMEs by enhancing efficiency and building resilience.

On this front, it has raised the fundraising limit from RM10 million to RM20 million with hopes that more MSMEs come on board to raise funds via these digital avenues.

“We have also opened up secondary market trading for ECF platforms which hopefully will provide some form of liquidity in the ECF market,” she said.

“As far as enhancing efficiency is concerned, the SC is looking at driving the adoption of digitalisation among intermediaries, by brokers and fund managers. We hope to catalyse more e-openings of accounts, e-corporate actions and e-submission moving forward.”