While it began as a Malaysian initiative under the Islamic Financial Services Act 2013, the Investment Account Platform (IAP) is finding renewed purpose under Shariah banking laws being implemented within the Bangsamoro Autonomous Region in Muslim Mindanao of the Philippines.
May 2024 saw the crowdfunding platform ink a memorandum of cooperation with the National Commission on Muslim Filipinos (NCMF) to explore a collaboration to forward Islamic fundraising and investments in the Philippines.
CEO Joann Maryam Enriquez told IFN Investor the strategic changes came after IAP’s Shariah fundraising went live in early 2016 and uncovered key hurdles faced – due to its previous operating model and structure with six Malaysian Islamic banks as shareholders.
“The whole design of IAP was not suited for the way banks are used to operating. Also, for any proposals, there had to be unanimous agreement by all six participating banks. So IAP was not as agile as we should be, when we should have been operating like a startup.”
Initial cracks appeared at the IAP’s parent Raeed Holdings when tenure ended for ex-CEO Mohamed Izam Mohamed Yusof in 2018 and Joann was hired as the replacement. By then, the six banks had already pumped in around RM12 million to create the platform, but returns were nominal.
An additional issue was the banks also being involved in the championing of fundraising candidates with IAP – as it was also them who could previously propose and list these candidates.
This caused the banks to be ultra-cautious to avoid reputational risk, in the event a candidate ran into hurdles, or worse – failed. This was despite the banks not being liable for any losses as the financing risk was borne entirely by investors who signed up and contributed funds via IAP.
The entry of Joann changed up IAP’s operational strategy to allow direct solicitation of firms pitching for funds, rather than the banks bearing sole responsibility to list these candidates.
“Running campaigns, we managed to raise north of RM213 million. There were no defaults and all due instalments from 13 projects have been almost completely paid back to the investors.”
Even then, the shareholder banks were chaffing at having to participate in screening potential candidates plus deploying resources which would be in competition with their own natural course of business lending operations.
Things came to a head in mid-2022 when additional capital injection into IAP was being mulled and the six banks agreed to withdraw from the management role to focus solely as the average IAP-registered investor, said Joann.
By early 2023, IAP’s entire assets had been transferred to the new entity of IAP Ventures, with the two shareholders being Joann and former Bank Negara Malaysia’s Islamic Finance, Economy and Fintech Specialist Dr Siti Muawanah Lajis – who became IAP Chief Strategy Officer in June 2022.
Since then, IAP Ventures has sought to obtain a new peer-to-peer financing license from regulator Securities Commission (SC) Malaysia to restart its operations – when another opportunity arose to work with the Bangsamoro taskforce.
Joann said NCMF has a roadmap, with strong support from the Philippines central bank, to implement Shariah finance initiatives for Muslim Filipinos – which is estimated to number around 10-12% of the 120 million-strong population in the Philippines archipelago.
“Conservatively, that number is comparable to how many Muslims there are in Malaysia but there is a huge divide when you compare the access to Islamic financing. IAP may become the first private sector mover of Islamic investments in the Philippines.”
Describing this prospect as huge for IAP, together with the growth potential for Islamic crowdfunding under the SC Malaysia’s regulatory oversight, Joann said IAP has received a lot of interest again in recent weeks.
Among the most prominent funding offers are from two significant Malaysian entities for the Philippines venture and also several individuals ready to join IAP Ventures as new shareholders. Joann said these aspects could be formalized by Q4 2024. “We are also hoping to restart our fundraising activities in both Malaysia and Philippines by then, assuming all the due regulatory approvals are granted.”
