Crowdfunding gaining traction with SMEs

By SHAHEERA AZNAM SHAH

Technology, socio-economy and financial landscape are the main pull factors for small and medium enterprise (SME) investors to dive into the crowdfunding concept.

Crowdfunding platform ATA Plus Sdn Bhd co-founder and director Elain Lockman said more SME investors are opting to invest through the crowdfunding concept as it requires less capital.

She added that both businesses and investors are showing greater interest in raising funds through the crowdfunding platforms, although the financial institutions still make the bulk of SME financing.

“The financial crisis in the US had caused an obstruction in accessing finance for the businesses. On top of that, Malaysians have been severely impacted with the rise of cost of living,” she said at the Malaysian Institute of Accountants’ (MIA) Capital Market Conference 2017 in Kuala Lumpur recently.

In one report, the World Bank estimated the global crowdfunding industry could draw up to US$96 billion (RM411.84 billion) worth of investments a year by 2025.

Lockman said the rise of the digital technology has played a dominant role in supporting the crowdfunding concept.

“The Internet has been there for many years now. But only in the last few years, we have seen the advancement of social media technologies and mobile technologies.

“These two advancements have been the backbone in bolstering the concept of inviting anyone to invest in a company for a smallest amount of RM10,” she said.

The online platform allows businesses to tap a wider audience as potential investors.

“The concept of crowdfunding is not an entirely new concept for us. For example, in the past if a small businessman wanted to start a project or business, he or she would ask funds from immediate family members and friends.

“The circle of potential investors for that businessman is wider if he were to do his business now. Through the crowdfunding platform, businesses can have access to people that they do not even know but have the same interest,” she said.

As crowdfunding is a rather “new” concept of raising capital, it tends to be associated with emerging businesses, such as the financial technology (fintech). Fintech is described as technological innovation in financial sector such as in financial literacy and education, retail banking and investment.

Lockman mentioned that consumers are more demanding towards personalised services that enables them to save time at a lower cost, which has been the fintech’s agenda for the past couple of years.

“Consumers want a service that is convenient to them. They are very time and cost conscious, thus they are willing to invest in services that can give them the most benefits.

“It does not matter whether you are new, as long as you have transparency and good governance in your business, crowdfunding investors will go to you,” she said.

There are several types of crowdfunding activities. The most popular are donation-based, reward-based, equity-and debt-based.

The maiden conference themed “Global Capital Markets: Entering A New Era” discussed a range of topics on innovation in fintech industry and the capital markets.

MIA is an organisation that develops and enhances the competency of accountancy professionals, as well as to support and regulate the practice of the profession to meet the global standards.