Date
26 May 2017
Small business owners can hardly access traditional funding channels such as bank financing but thanks to corwdfuding, they have a viable alternative. Photo: Xinhua
Small business owners can hardly access traditional funding channels such as bank financing but thanks to corwdfuding, they have a viable alternative. Photo: Xinhua

Equity crowdfunding: What we can learn from Southeast Asia

Southeast Asian countries have been stepping up efforts to improve their infrastructure, nurture startups and optimize their regulatory regime.

In recent years, they have been promoting the crowdfunding industry which has been a key backer of start-up companies.

More than 90 percent of companies in the region are SMEs (small and medium-sized enterprises), employing one in 10 workers.

But small business owners can hardly access traditional funding channels such as bank financing.

The situation is even worse in mainland China.

A study by the Asian Development Bank shows less than 20 percent SMEs are able to get bank financing.

With the rise of equity crowdfunding, governments in the region have a good support base for SMEs.

However, concerns over investor protection are impeding participation by fund companies. These have resulted in some restrictions on crowdfunding platforms.

In February, Singapore set a threshold for participants in equity crowdfunding.

They must have at least S$2 million (US$1.4 million) in net assets, or have income of more than S$300,000 in the previous 12 months.

The requirement bars small retail investors but the rule ultimately will result in the healthy development of the crowdfunding industry.

In Malaysia, domestic companies can raise up to US$850,000 in a 12-month period.

But their equity crowdfunding is capped at MS$1.4 million (US$337,870).

Investors don’t need proof of their financial ability but they are limited to US$1,200 in any one project, up to US$12,000 a year.

What’s interesting is that the Malaysian government has a cool-down period in these regulations.

It allows individual investors to get a refund within six days of the investment being made.

In Thailand, the rule is similar to that in Malaysia.

Investors can put in as much as US$1,500 in one project, up to a combined US$15,000 a year.

No doubt the trend in global financial markets toward equity crowdfunding is catching on.

As an international financial center, Hong Kong cannot afford to overlook it.

The government should consider measures to encourage crowdfunding.

This article appeared in the Hong Kong Economic Journal on March 3.

Translation by Myssie You

[Chinese version中文版]

– Contact us at [email protected]

MY/JP/RA

Director at Spring Capital

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