Malaysia is the third largest market for global Islamic finance products and it is set to keep expanding in 2020 and beyond. However, when it comes to Islamic fintech, it is still vague and a lot needs to be done. One of the youngest in the league is microLEAP, a Malaysian P2P (Peer-to-Peer) platform that has set itself apart by focusing on microfinance sector and offering Shariah-compliant service.
WargaBiz has had the opportunity to talk with Tunku Danny Nasaifuddin Mudzaffar, the founder and CEO of microLEAP to share his experiences and thoughts on making Malaysia as an Islamic fintech hub.
How it began
The fintech company, which was given the “Go-Live” status by the Securities Commission Malaysia (SC) in October 2019, intends to make a difference in Malaysia’s P2P financing landscape. MicroLEAP focuses in offering access to microfinancing to the underserved population – especially to the B40 group with financing as little as RM 1,000 to RM 50,000 in order to help them improve their livelihood.
“I’ve always been a banker all my life. As a banker, I have worked in several major banks in London and KL before setting up microLEAP. Having had 15 years of banking experience, I wanted to do something different. I wanted to put my knowledge and skills that I had learned in banking into something that would have an impact on people’s lives. So, I felt that P2P micro financing would have a definite social impact,” he says.
“Small steps, big impacts”
With their tagline “Small Steps, Big Impact”, Tunku Danny makes it as their priority to provide social impacts and value-added services such as providing microinsurance to issuers, online video training on basic debt management and basic accounting on their platform as he realises that there is a big gap for funding among micro-enterprises and startups who may find it difficult to access traditional loans.
“When I found out Malaysia regulated the P2P financing space, I thought that it’s a good plan to combine microfinance and peer-to-peer (P2P) and draw it as the main objective in building my own P2P microfinancing platform. Then, a vision about Shariah-compliant financing was formed to set our niche in the industry.”
Building bridges between fintech and microenterprises
MicroLEAP is a fully online, P2P platform where microentrepreneurs can raise funds for their small businesses on the platform via shariah financing or through conventional financing without leaving the comfort of their home or office.
“It’s very easy to do. All you need is a smartphone or a laptop to raise funds. They just need to fill in the form online and upload necessary documents and we will do all the necessary works including credit checks. Once all that is done, we will host the Investment Note on our platform. In Malaysia, smartphone penetration is one of the highest in the region which is about 78% and internet penetration is at 80% – making it perfect for digital financial services.”
On the other hand, individual investors who are looking to invest and grow their wealth can crowdfund into these microenterprises and in return, gain 10-12% per annum as well as steady monthly return.
Educating people about shariah-compliant P2P microfinancing
Even though peer-to-peer financing platform had first been introduced in 2016, Tunku Danny shared that there is a substantial amount of people who have not been exposed to it. Pursuant to this, there are plans to educate the public as there is a lot of education that needs to be done. However, Covid-19 pandemic has slowed down their plans.
“We have several initiatives lined up as in roadshows, investment talks and financing talks. Unfortunately, Covid-19 caused us to change our plans. But we’ll be doing roadshows once everything goes back to normal. I would like to educate people about Shariah-compliant P2P financing as an alternative option for all the B40 microentrepreneurs. Its’s going to take a while but we can slowly get back.”
As Covid-19 has greatly impacted businesses across industries, Tunku Danny states that the pandemic impacts them too. The global pandemic has slowed down the number of Investment Notes that they are hosting on their platform.
“We have to be selective as the last thing we want is for our P2P investors to invest in a business that will not exist in the next 2-3 months. So, we have to be very careful who we host on our platform. MicroLEAP is being stringent in term of credit criteria because after all, we want to be a responsible lenders as well.”
Despite being a new fintech company in the country, microLEAP has secured a few partnerships and the biggest partnership achievement is with Malaysia Technology Development Corporation (MTDC) where they allocated RM 2 million funds for microLEAP to help them finance some of their Investment Notes.
“This partnership shows that MTDC sees the value that microLEAP can bring to them. It also shows they have faith in what we are doing and in what we have achieved. Partnership is the key and that’s the way how we can grow our user-base and also our issuers and investors.”
MicroLEAP also partnered with MDEC, in their e-Berkat programme which will help microenterprises and the B40 access shariah-compliant digital financial services. All these were achieved by a small team of six people including Tunku Danny himself.
Outlook for 2020
MicroLEAP adapts quickly. While forming an idea, they execute it thoroughly and they proved that Islamic fintech can be a huge thing in Malaysia. When asked about their plan in expanding the business, Tunku Danny shares that he’s trying to secure partnerships with the states’ government.
“For the time being, we want to fully focus in Malaysia. By the third year of our operation, we want to expand in Indonesia as the prime market in Asia is Indonesia – home to the world’s largest Muslim population.”
“Next, we want to set foot in the Philippines and then Laos and lastly Cambodia. We aspire to become a regional player in the future.”
As someone who is a visionary in his field, Tunku Danny would like to push Malaysia as an Islamic fintech hub. Despite being a strong country in term of Islamic finance, he believes that we still need to push more on fintech.
“We are still lacking behind as compared to Singapore where fintech is doing well there. That’s the reason why we partner with MDEC as they can bring this idea forward. I believe if we do well, we can push Islamic fintech forward in Malaysia,” he ends.