This article first appeared in The Edge Malaysia Weekly on November 20, 2023 - November 26, 2023
KHAZANAH Nasional Bhd is looking at acquiring a stake in Modalku Ventures Sdn Bhd, the company behind small- and medium-sized enterprise (SME) digital financing platform Funding Societies Malaysia, sources say.
“It is currently at the due diligence stage,” a source tells The Edge, adding that the potential investment would fall under Khazanah’s Dana Impak initiative. The move would enable it to spur financing for SMEs, many of which face difficulty in obtaining funds from banks.
Dana Impak, a key pillar under the sovereign wealth fund’s Advancing Malaysia strategy, is a RM6 billion allocation over five years that seeks to invest in areas that would boost the country’s economic competitiveness and build national resilience, while delivering socioeconomic benefits and impacts to the people.
The Edge understands that a development financial institution may also invest in Modalku Ventures in partnership with Khazanah, albeit on a smaller scale.
When contacted, Khazanah and Funding Societies Malaysia co-founder and group CEO Kelvin Teo declined to comment.
Modalku Ventures, one of the entities under the Funding Societies|Modalku group, is wholly owned by Singapore-based Funding Asia Group Pte Ltd.
Launched in February 2017, Funding Societies Malaysia is the country’s largest SME digital financing platform. The platform brings together SMEs and investors, offering short-term financing products to SMEs and investment opportunities to individuals and institutions that want to invest in Malaysian SMEs.
According to CTOS data, Modalku Ventures has yet to turn a profit. It registered its best performance in the financial year ended Dec 31, 2022 (FY2022), having narrowed its loss after tax to RM314,329 from RM4.59 million in FY2021. Revenue that year improved substantially to RM181.11 million — its best yet — from RM9.31 million in FY2021. The company has a paid-up capital of RM22.41 million.
Apart from Malaysia, Funding Societies is in four countries — Singapore, Indonesia, Thailand and Vietnam — and claims to be the largest SME digital financing platform in Southeast Asia.
Regionally, the platform has disbursed RM15.34 billion across more than five million transactions of business financing to SMES, with a low default rate of 1.71%, according to data as at November on its website. In Malaysia, the current default rate is slightly higher, at 2.23%. Almost 100,000 SMES have benefited from the access to financing.
In November last year, Funding Societies Malaysia collaborated with national car maker Proton Holdings Bhd to provide credit facilities for dealers to finance the purchase of cars for floor stocking.
Earlier in June, Khazanah had, under its Dana Impak mandate, led a Series B fundraising round of a Malaysian home-grown insurance technology (insurtech) company, PolicyStreet, raising a total of US$15.3 million, or RM67 million at the time. PolicyStreet, a full-stack insurtech company, provides digital and customised insurance solutions to consumers and businesses.
Dana Impak funds are meant to be invested across six key themes, namely digital society and technology, food and energy security, decent work and social mobility, quality health and education for all, building climate resilience and competing in global markets.
Last month, Khazanah managing director Datuk Amirul Feisal Wan Zahir said that Dana Impak would allocate RM600 million in 2024 to spur economic growth and create opportunities for rural, suburban and underserved communities, in line with the government’s vision of more balanced regional development.
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