Small and medium-sized enterprise (SME) digital financing platform, Funding Societies, is introducing Shariah-compliant trade financing solutions for the underserved segment which are the micro, small, and medium enterprises (MSMEs) in Malaysia.
The financing solutions are based on Commodity Murabahah (Tawarruq), which is the purchasing of Shariah compliant commodity with deferred price, then selling it to a third party to obtain cash.
Key Highlights
- Co-founder and chief executive officer of the company, Wong Kah Meng mentioned that MSMEs have limited access to financing due to their low to zero credit track record, lack of assets to pledge, and lack of financial documents for credit assessment.
- Wong also added that the issue was worsened during the pandemic due to the lockdown and limitations in meeting customers face to face, hence making it difficult for traditional financial institutions to issue loans to MSMEs.
- To comply with Shariah principles, the fintech company is partnering with Masryef Advisory, a registered Shariah advisory company with the Securities Commission as its Shariah advisor.
- According to Funding Societies, the Islamic financing solution has no hidden fees and no collateral financing with flexible repayment tenures.
- Any businesses that are Shariah compliant - not related to tobacco, liquor, gambling - can apply for the financing.
- Funding Societies mentioned that the Malaysian Islamic fintech market was estimated to be valued at US$3 billion in 2021.
