SME digital finance platform Funding Societies, which launched new Islamic finance offerings earlier this week on the 30th May 2023, is rolling out ESG considerations across its Islamic and conventional offerings in Malaysia this year, Wong Kah Meng, CEO and co-founder of Funding Societies Malaysia, told ISFI.
The group, which operates across Southeast Asia, has been in the process of integrating ESG considerations into its core business through various operational processes since 2022.
“We have started investing in rolling this [sustainability initiatives] out across the region … The next country we are looking to pilot and launch is Malaysia…
“The main initiative in Malaysia in 2023 is to create an ESG risk assessment framework,” Wong elaborated.
The ESG risk assessment framework will be part of the assessment process for the fintech’s SME borrowers and will consider the environmental and social risks of potential borrowers.
While still in the early stages of implementing ESG initiatives in Malaysia, the CEO noted that it should be applied across its Islamic and conventional offerings, especially considering the synergies between Islamic finance and sustainability.
The group has implemented sustainable initiatives including increasing funding accessibility to ‘ecopreneurs’ and female entrepreneurs in Indonesia under Modalku and is hoping to increase its funding allocations to industries in line with its sustainability focus themes of climate change, circular economy and inclusion.
According to Wong, the rolling out of sustainable initiatives is a function of both the regulatory landscape as well as investor demand.
Also impacted by investor demand and funding opportunities, according to Country Head of Funding Societies Malaysia Chai Kien Poon, is the launch of its Islamic products, with tapping the Islamic investor base being one of the key drivers.
“We did speak to a lot of investors in Malaysia, both retail, sophisticated and institutional, and there is a lot of demand for Islamic investments. If fact, some of them can only do Shariah [investing]. We do feel that there’s quite a lot of capital there to unlock,” Chai told ISFI.
The company has onboarded a group of investors who are actively seeking Islamic investment opportunities and is working on expanding the pipeline. Roughly 15% of its monthly disbursement is currently from Islamic products, which is expected to increase over time, Wong shared.
The SME financing platform currently offers working capital financing, invoice financing and microfinancing products under its Islamic product offerings.