The Securities Commission (SC) of Malaysia today unveiled its annual report for 2023, offering an in-depth analysis of the capital market’s performance and strategic initiatives over the past year.

The report provides a thorough review of advancements in alterative fundraising, support initiatives for Micro, Small, and Medium Enterprises (MSMEs), rising concerns regarding investment scams, and notable achievements in the realms of digital investment frameworks and the digital assets sector.

1. Alternative fundraising is on the rise

The SC has played a pivotal role in the expansion of alternative fundraising through the introduction of innovative capital market solutions, fostering partnerships that aim to enhance business financing, job creation, and asset ownership.

A key highlight is the partnership with SME Corp, aimed at catalysing MSME access to capital markets. The collaboration is set to make approximately 200 MSMEs capital market-ready by 2026 and to familiarise about 300 MSMEs with sustainability disclosures and corporate governance best practices.

In line with Ekonomi MADANI’s goals for economic growth and sustainability, the ECF and P2P markets have surpassed RM6 billion in funding for over 15,000 businesses.

2023 saw a record 29% growth in fundraising despite economic uncertainties, with a major shift towards Shariah-compliant financing, which grew to RM524.8 million from RM140.8 million in 2022, representing 24% of all funds raised.

The SC’s efforts to expand these markets have also attracted institutional investors, contributing nearly RM1.3 billion, or 57% of the total funds raised in 2023.

The regulator has also welcomed new ECF and P2P operators with Shariah-compliant solutions, aiming to liberalise the capital market for MSMEs and MTCs.

This initiative includes two new ECF platforms approved for their Shariah-compliant propositions, in addition to the nine existing operators.

Recognising the financing gap for mid-tier companies (MTCs), which are vital to Malaysia’s GDP but often overlooked by traditional public markets, the SC has introduced new registrations for P2P platforms offering larger, long-term debt-based financing for MTCs. This move has already seen the registration of a new P2P-MTC operator.

2. Male investors at higher risk of scams

The SC’s report has highlighted a worrying 321% increase in investment scams complaints over the last five years, with men being predominantly the victims. This trend emphasiaes the urgent need for improved investor education and awareness.

Scammers have employed various deceitful tactics, promising unrealistic returns and benefits, leading to significant financial losses. In 2023 alone, the SC recorded 3,262 complaints on scams and unlicensed activities.

Such schemes have exploited platforms like social media for cryptocurrency scams, while others have used job offers or even romantic engagements on dating apps to commit fraud.

For instance, victims have been lured into transferring money for investment in non-existent cryptocurrencies or share schemes, often through seemingly legitimate channels like the SC’s registered Digital Asset Exchanges (DAX), or tricked into giving money to mule accounts under the guise of high-return investments.

To better understand the vulnerability of investors to scams, the SC conducted a behavioural analysis in 2023, surveying 1,302 individuals.

The study revealed that 30% of respondents, particularly young male adults from lower-income households with at least a diploma qualification, were more susceptible to scams.

Many in this group depended on advice from unlicensed or unqualified sources, including family and friends, making them more likely to be swayed into fraudulent investment opportunities.

3. Digital investment experiences robust growth

The Digital Investment Management (DIM) sector has witnessed substantial growth since its inception in 2017, enabling both newcomers and veterans in the market to leverage digitisation for new innovative solutions for offering capital market products and services.

By the end of 2023, DIM’s assets under management (AUM) had expanded 400-fold, reaching a valuation of RM1.6 billion. Although DIM accounts for less than 1% of the total AUM in the fund management industry, it has experienced a consistent increase, with a 15% growth in 2023 alone.

The e-services platform (eSP) framework, introduced in 2020, has significantly contributed to enhancing Malaysia’s digital financial landscape. This framework facilitates platforms such as e-wallets and e-payment service providers in democratising the online distribution of capital market products, like unit trusts, to a wide and diverse investor base.

To date, 43 capital market products have been made available through these platforms, providing seamless and expanded access to investment opportunities across the nation.

4. Digital Innovation Fund (DIGID) spurs technological solutions

The SC’s Digital Innovation Fund (DIGID), endowed with RM30 million, is designed to co-fund innovative solutions that are new to the market, scalable, and sustainable, aiming to transform the capital market landscape.

This initiative supports the development of technology-driven projects by smaller capital market players, in alignment with the SC’s agenda to enhance the competitiveness and growth opportunities within the Malaysian capital market.

To date, 15 projects have been awarded grants with a total of RM6.24 million, demonstrating a wide array of innovations spanning artificial intelligence (AI), data analytics, distributed ledger technology (DLT), and more.

These projects have the potential to significantly improve market efficiency, inclusivity, and regulatory compliance. Administered over a three-year period, from 2023 to 2025, DIGID aims to defray up to 70% of approved qualifying expenses, capped at RM500,000 per project.

Award recipients are funded on a reimbursement basis, following the completion of milestones that include the presentation of the solution and achievement of its intended outcomes.

The funded projects under DIGID cover a diverse range of capital market segments, including financial planning, investment advisory, fund management, ECF, P2P financing, bond market, unit trust, PRS, and digital assets.

5. FIKRA ACE fosters Islamic fintech

The launch of FIKRA ACE, an enhanced Islamic fintech accelerator programme, is part of the SC’s broader strategy to leverage fintech in promoting the growth and expansion of innovative solutions tailored for the halal economy, Socially Responsible Investing (SRI), and social finance.

FIKRA ACE builds on the foundation laid by FIKRA, Malaysia’s first regulator-led Islamic fintech accelerator created in partnership with the United Nations Capital Development Fund (UNCDF) in 2021.

This programme aims to identify, scale, and integrate Islamic fintech solutions that address key challenges in new ICM offerings, accessibility, and social finance integration.

Launched in June 2023, FIKRA ACE enhances the original FIKRA programme by introducing a three-component structure: an Accelerator for Islamic-solutions, a Circle for networking among ICM and fintech stakeholders, and Excel for capacity-building collaborations with higher education institutions.

The Accelerator component kicked off on 5 September 2023, in collaboration with the Malaysia Digital Economy Corporation (MDEC), featuring an 8-week programme that culminated in a Demo Day on 9 November 2023.

Ten startups were selected as finalists, including EPC Blockchain and Eversustain, with Global Psytech and Pewarisan emerging as the winners, securing a combined prize of RM80,000.

Following the Accelerator, the Excel component is set to launch in the first half of 2024, aimed at fostering further collaborations with educational institutions.

Dato’ Seri Dr. Awang Adek Hussin, SC Chairman said

“2023 also holds special significance as it marks SC’s 30th anniversary, a major milestone that underscores the growing maturity and resilience of the institution.

 

The SC remains unwavering in our resolve to strengthen our regulatory framework and uphold market integrity, not least because we continue to be measured against global regulatory standards.”