KUALA LUMPUR: The Securities Commission Malaysia (SC) yesterday released the region's first comprehensive regulatory framework for peer-to-peer financing (P2P), an online platform which matches local unlisted businesses to both retail or sophisticated investors.
Investors who invest through a P2P platform are buying securities in the form of an investment note or Islamic investment note, which will be issued by the businesses or companies. The issuer is then obliged to pay investors over a time period, with interest or profit.
The new framework comes into force on May 2, 2016.
P2P, which currently runs into hundreds of billions of dollars worldwide, was first introduced more than a decade ago, and is expected to go live here in early 2017.
Markets such as the UK, the US, Hong Kong and Singapore already offer P2P. China has about 3,600 P2P platforms currently.
However, a key difference between the Malaysian version and others is that no individual seeking personal financing will be allowed on such a platform to raise funds.
SC officials, in a technical briefing, said this is in keeping with their focus to grow market-based financing innovation for small and medium enterprises.
The move is also in line with Bank Negara Malaysia's policy in maintaining vigilance on excessive growth of personal loans in the banking system, following double-digit growth in the segment a couple of years ago.
Submissions for applications to be qualified as P2P operators can be handed in to SC from May 2, 2016.
Parties seeking to be P2P operators must be locally incorporated and have a minimum paid-up capital of RM5 million.
There is no investment limit imposed on a sophisticated investor and angel investor, while retail investors are strongly advised to limit their investment exposure in P2P to a maximum of RM50,000 at any point of time.
In 2015, Malaysia became the first country in Asean to introduce a regulatory framework to facilitate equity crowdfunding, with six registered equity crowdfunding platforms expected to be fully operationalised this year.