- Not equity investment into CapBay but provide funds for Shariah-compliant financing
- Kenanga believes digital platform enables a faster, more convenient process for SMEs
In a boost for SMEs seeking shariah compliant financing, Bay Group Holdings Sdn Bhd, which operates as CapBay, a Malaysian multi-bank supply chain finance and peer-to-peer financing (P2P) platform has secured US$7.1 million (RM30 million) investment from Kenanga Capital Islamic Sdn Bhd (KCI), a subsidiary of Kenanga Investment Bank Bhd (KIBB). The fund injection is a step forward to growing CapBay’s Shariah-compliant Supply Chain Finance arm, CapBay Islamic, which is approved for Shariah-compliant P2P financing by the Securities Commission Malaysia (SC).
The funding will be allocated on a matching basis to SMEs that want to borrow through CapBay’s P2P Platform, with the ratio not disclosed by CapBay. A spokesperson for CapBay explains that, “While there’s currently no distinction between a conventional and Shariah-compliant P2P platform, we need to get SC’s approval to offer Shariah-compliant Islamic Investment Notes on our P2P platform and adhere to the relevant Shariah-compliant processes.”
[Ed: Para updated for clarity.]
KCI and CapBay already have a strong partnership that began when CapBay took a 49% stake in KCI in Nov 2020 to form Malaysia’s first Islamic supply chain finance fintech.
[Read also: CapBay secures US$20 million Series A with returning backer KK Fund | Digital News Asia]
“CapBay is thrilled to receive the support from Kenanga and for sharing the same spirit of helping SMEs thrive especially during this time. The injection of funds will help to accelerate the growth of Malaysian SMEs and with the launch of our Islamic receivables and working capital financing solutions, we believe that this will add another dimension to our efforts in supporting the SMEs in the country”, said Mohd Mokhtar Mohd Shariff (pic, left), Chairman of CapBay.
“CapBay has been a great partner and with this investment, we hope that we can bring a positive impact to the SME community in Malaysia. We have been collaborating with CapBay to develop an Islamic fintech to serve a wide range of SMEs through a digital platform that enables a faster and more convenient process,” said Chay Wai Leong (pic, right), Group Managing Director of KIBB.
“We are seeing increasing demand for shariah compliant capital. The investment allows us to respond to the market demand, and demonstrate our increased focus on islamic financing,” says CapBay founder and CEO Ang Xing Xian.
Accelerating the growth of Malaysian SME with Islamic Supply Chain Finance solution
Leveraging on CapBay’s strong technological expertise, SMEs can now obtain flexible and cost-effective financing seamlessly through a digital platform. Through the innovation of the Malaysian fintech, KCI can benefit from predicting risk in each transaction that goes beyond just financial statement analysis but utilises machine learning to assess thousands of data points such as historical relationships, payments, contract quality and other patterns. This data-driven approach helps to invigorate the Islamic Supply Chain Finance solution for the underbanked.
As the SME financing market continues to grow rapidly, the demand for a Shariah-compliant option has increased. According to the Association of Islamic Banking and Financial Institutions Malaysia, it predicted that half of Malaysia’s banking assets to be Islamic by 2030 as the industry’s growth outpaces conventional banking.
“The adoption rate of Islamic financing in Malaysia is growing – this is a clear reflection of the demand for Shariah-compliant products in the country. We noticed many of our clients seeking an Islamic alternative to our products and we are catering to this growing demand,” said Mokhtar Shariff. A report by Fintech News Malaysia shows that out of 233 fintechs operating in Malaysia, CapBay is part of the small 4% that are Islamic fintechs.
Expansion of investment opportunities whilst maintaining low default rates
With this latest initiative, CapBay’s P2P investors can now expand and diversify their investment portfolio by investing into Islamic financing notes. These notes are predominantly backed by government and Government-Linked Companies (GLC) receivables.
CapBay differentiates itself by offering lower risk investment notes in a bid to enhance investor trust and confidence especially during these times of uncertainty. They recently launched a guaranteed investment programme which is Malaysia’s first guaranteed P2P investment backed by a reserve fund. CapBay’s P2P platform has maintained 0% default since its launch in March 2020.