SSM backs Interest Schemes

KUALA LUMPUR: The Companies Commission of Malaysia (SSM) is advocating the use of Interest Schemes as a platform for entrepreneurs or SMEs to seek alternative financing, with the repealing of the Companies Act 1965.
Interest Schemes was a small part of the Companies Act 1965 (now repealed), applied primarily to protect consumers in golf, recreational clubs and time-share schemes and was literally, haphazardly put together and used to regulate intricate investment products.
A one-day conference themed, “SSM National Interest Schemes Conference 2017. Interest Schemes Act 2016: Alternative Financing For Business Growth”, brought together SSM and Interest Schemes industry leaders from all over Malaysia to exchange information and promote better understanding of the Interest Schemes reform under the Interest Schemes Act 2017.
Companies Commission of Malaysia (SSM) CEO Datuk Zahrah Abd Wahab Fenner said the new Act is more robust and better equipped to handle the complex and intricate investment products that qualify as interest.
Interest is looked upon by some as an emerging new form of wealth. As a new form of asset class that can turn an interest unit into something with monetary value or become valuable possession or right, endless possibilities are open for companies to structure interest units in dynamic and innovative forms to help raise funding for their business growth.
Zahrah said while business creativity knows no boundary, SSM as the regulator must however ensure that businesses do not go overboard in designing their scheme business model to the point that it upsets the balance in the financial ecosystem.

She said by positioning interest schemes to cover the under-served market, it will complement the efforts of mainstream financing channels.
The under-served market covers a broad area of the national economy but are more-or-less shunned by the mainstream financing channels because they are perceived to be riskier. In the agricultural sector, entrepreneurs especially in the SME category find themselves short of funding options to grow since players in the mainstream financing channel are generally risk averse.
Certain government initiatives to provide early financial assistance for young entrepreneurs or SMEs are designed to allow the entrepreneurs or SMEs to obtain a stable foothold in business. For future growth, there is still a sizeable gap between the low-end and top-end range of the financing eco-system.
“For instance, financial grant from the government or soft loans under government-led initiatives may only be available to fund a company’s operation for a limited time or maintain a certain size of operations. On the other hand, the company may not require the kind of funding available at the top-end of the financing eco-system,” said Zahrah. She added that Interest Schemes platform can serve to bridge the gap in terms of market readiness from SME level to public listed issuers.