The Securities Commission (SC) announced on 7th May 2009 new guidelines and best practices aimed at helping the country's Islamic venture capital industry meet the international benchmark.
Managing director Datuk Nik Ramlah Nik Mahmood expects the new guidelines to enhance local and foreign fund interest in investing in syariah-compliant businesses. The two core components under the new guidelines are the requirement to appoint shariah advisers and the core business must be shariah-compliant.
As at end-2007, there were 98 venture capital corporations (VCC) and venture capital management corporations (VCMC) registered under the SC with total funds worth RM3.3bil.
Ramlah said the country's venture capital (VC) and private equity (PE) was driven by demand for equity funding from emerging and expanding businesses. She noted that the Government had allocated about RM1.6bil for the industry under the Ninth Malaysia Plan. In addition, the Capital Market Masterplan also introduced specific initiatives and tax incentives to encourage more foreign participation in VCCs and VCMCs.
Meanwhile, Malaysian Venture Capital and Private Equity Association chairman Azam Azman said the VC and PE markets in Malaysia and South-East Asia were still growing based on the influx of investments flowing into Asia from the Middle East recently.He said the funds committed to VC and PE asset classes both in Malaysia and globally had grown significantly over the past 10 years. From 2005 to 2007, the total number of VCCs and VCMCs in Malaysia grew by 13%. Azam noted that total VC investments rose to RM1.78bil in 2007 from RM1.59bil in 2006. There was also a 183% rise in the amount invested in investee companies from RM169mil in 2006 to RM479mil in 2007.
He added that investment in investee companies which traditionally focused on the information and communications technology sector were shifting to other areas such as life sciences, electricity and power generation, education, trading, transportation and finance.
The Government hopes more Islamic venture capital companies will be set up to support Malaysia’s aims of becoming the regional hub for Islamic finance.
Deputy Finance Minister Datuk Dr Awang Adek Hussin said Islamic venture capital was a new area in which the Government sought more investment.
“This is in line with the Government’s aspiration to promote Islamic finance, banking and capital markets as well as their related products such as Islamic venture capital and private equity,” he told a press conference after delivering the keynote address at the Islamic Venture Capital and Private Equity Conference 2009 on 20th May 2009 organised by Malaysian Venture Capital and Private Equity Association (MVCA) and Islamic Banking and Finance Institute Malaysia (IBFIM).
He added that given the contracting global credit markets, the promotion of Islamic venture capital and private equity was both appropriate and timely.
To date, only one Islamic venture capital fund has been set up in Malaysia which is managed by Musharaka Venture Management Sdn Bhd, with a fund of RM35mil.
Musharaka was launched last July by Malaysia Venture Capital Management Bhd, the venture capital arm of Ministry of Finance, as part of its Second Outsource Partners Programme. According to MVCA vice-chairman Shaik Taufik Shaik Yusoff, Musharaka which had not made any investment yet, expected to find suitable companies to invest in this year as it is looking at a few deals currently.“The fund will primarily lean towards companies involved in information and communications technology as well as high-tech businesses,” he said.
On Islamic banking in Malaysia, Awang Adek said in his keynote address that the sector had registered double-digit growth in the last eight years with an average annual growth of 20% in terms of assets. “The share of Islamic banking assets in the total banking sector expanded to 16.7% last year compared with 6.9% in 2000. “And about 60% of the world’s sukuk issuance originated from Malaysia last year. In the first quarter of this year, another RM6.4bil was issued that has made Malaysia a leader in the global sukuk market,” he said.
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