This article first appeared in The Edge Financial Daily on November 7, 2017 - November 13, 2017

KUALA LUMPUR: The government will set up a co-investment fund (CIF) with RM50 million from existing grants to be co-invested in small and medium enterprises (SMEs) with private investors through equity crowdfunding (ECF) and peer-to-peer (P2P) platforms.

Second Finance Minister Datuk Seri Johari Abdul Ghani said the Securities Commission Malaysia (SC) would assist in the set-up of CIF and define the co-investment criteria for both equity and debt-based financing.

“Once the fund is operationalised, it will co-invest in ECF and P2P financing campaigns which have managed to attract the required amount of private funding and other criteria.

“Through this co-investment fund, we hope to provide efficient mechanism for shared partnership and responsibility between Malaysian investors and the government to co-invest and grow our SMEs,” he said in his keynote speech at the SCxSC Digital Finance Conference 2017.

Speaking to reporters later, the minister said the platform is important to the ecosystem of SMEs due to the ability to tap into the open market via ECF or P2P to raise funds.

“So we are democratising the platform for start-ups, and those already operating in micro financing,” he said.

“Then we will see how we can participate in the P2P and ECF to help SMEs. Together with venture capitalist, these are part of the SME ecosystem we have to create in order to take the risk from our banking sector,” he added.

Johari said the government would consider increasing the number of ECFs and P2Ps if there is a demand.

Malaysia was the first country in Asia-Pacific to introduce the regulatory framework to facilitate ECF in 2015, P2P financing last year and digital investment management in May this year.

The SC said its digital markets strategy with 12 ECF and P2P platforms funded a total of 450 campaigns, raising RM50 million for micro SMEs.