Sustaining a business can be a complicated affair, especially for micro, small and medium businesses (MSME) which make up about 97 per cent of Brunei’s overall companies.
Though starting a business may not be as daunting of a task as it used to be, securing the funds to expand it is no walk in the park, and not all businesses have access to the same means.
Enter Jana Kapital, Brunei’s pioneer Syariah-compliant peer-to-peer (P2P) crowdfunding platform, which according to Managing Director, Hj Aidil Salleh, aims to source and mobilise funds into social impact, the real economy and productive sectors “via Syariah-compliant structures targeting local MSMEs”.
Established in 2017, Jana Kapital, according to Hj Aidil was conceived after the former banker and private equity professional took notice of the progress that crowdfunding has made globally, and most notably, its exponential growth in the region.
What is crowdfunding, how does Jana Kapital work?
Crowdfunding is the process of raising capital for a project, business or charitable cause through a pool of contributors via the internet and is touted as a flexible and efficient, alternative form of fundraising solution to the traditional bank methods.
“At Jana Kapital, we would be looking to facilitate the funding of MSMEs and startups that have certain asset requirements to run their business operations,” he explained.
Once a business or a project has been identified, he added, and after they satisfy a set minimum eligibility criteria, Jana Kapital will be hosting them on their online platform, with the aim of raising funds for their specific asset needs.
“We will put up a campaign for them and host it (on our platform) for a specific time period and for the amount of investment needed,” he said.
“Consequently investors or subscribers on the platform will be able to view the campaign and, at their own discretion may decide either to support such a venture or opt to do nothing,” continued Hj Aidil.
Participants will be open to the general public, provided they are 18 years of age.
Once the campaign duration lapses and if the campaign and fundraising are successful, Jana Kapital will be able to disburse the amount of money to purchase the necessary assets through a designated trustee.
“(Through Jana Kapital) investors will benefit from a totally new investment experience as they will have the opportunity to participate in the financing of local MSME projects – the driving force of the real economy sector in Brunei Darussalam,” he went on to say.
Ultimately, the managing director highlighted how the platform will bring about transparency, based on real-time projects and financings that will be driven by the operational asset needs of local MSMEs.
“Partly, also the platform aims to drive away illegitimate and unwarranted investment schemes that have been exposed to the general public in recent years,” he added.
Building a case for crowdfunding
For Hj Aidil, Jana Kapital represented financial inclusion for local MSMEs, as well as a means for Islamic crowdfunding to generate a positive impact on the country’s economy.
“Financial inclusion is a topic very close to the heart of central banks all around the world so that nobody gets left out from the financial system,” he said.
As an alternative for MSMEs to raise funds outside of traditional financial institutions, he noted how Jana Kapital differs in operations to ensure financial inclusion, especially in the aspect of the minimum eligibility requirement for being listed on the platform.
“We are quite lean in that respect, as they must have a minimum of one year of operation since establishment with an annual net profit of $24,000 which is equivalent to a revenue of B$2,000 per month, a generally achievable quota for a (young) business,” he said.
“We are (currently) at what we call a category 3 testing and experimentation fintech company under purview of Autoriti Monetari Brunei Darussalam’s (AMBD) Fintech Regulatory Sandbox,” he continued.
What that entails is that the company is permitted by AMBD to conduct tests on their products and services offered to the public, for a definitive period.
For Jana Kapital this period will be for two years, which began from the last quarter of 2020, according to Hj Aidil, adding that beyond the sandbox period, the company will be assessed by AMBD if it is “fit for purpose” to serve the Brunei market.
Building trust through due diligence
As a crowdfunding pioneer in Brunei, Hj Aidil reiterated how Jana Kapital has to perform a number of due diligence processes within their operations.
These include shortlisting potential companies that are deemed suitable for the platform, and assessing their activities, to ensure they are in line with Islamic principles.
“We cannot deal or support companies that are running in a non-Syariah-compliant way, so the fundamental thing for us to do, is to engage with the companies,” he explained.
“We talk to them, to the point of assessing any immediate requirement of assets or anything to expand their business (and) based on the information that we have acquired, if we feel that the commercial viability of the project is good then we’ll go ahead with listing the company or project (on our platform),” he added.
At the end of the day, Islamic crowdfunding or even crowdfunding, in general, is relatively new for the Bruneian market, continued the managing director, and having said that the due diligence process is ultimately to create appeal and inspire confidence among investors.
“We are very mindful that the platform is new, and with that being said, there is a need for the platform to introduce and promote companies or projects that are of high commercial value (and hopefully) the investors will get some return from their venture through the landing platform,” Hj Aidil went on to say.
The launch and the way forward
Jana Kapital is looking to roll out its online platform in the first quarter of this year and at its current stage, the crowdfunding platform will only be able to list four companies with a collective investment of B$1 million per year, as per AMBD regulatory parameters.
Despite this, however, Hj Aidil is confident that Islamic crowdfunding will have a positive impact on the country’s economy, and that crowdfunding truly has a place in the capital market scene in the sultanate.
“It is imperative that we try to conduct Jana Kapital in a good way, and that we are able to prove that we have good numbers and are supported by the investing public,” he went on to say.
“Crowdfunding will make its way to Brunei, and of course we won’t stop there, there is a whole host of Islamic finance structures that we can employ (in the future), but as of now, Jana Kapital follows the Islamic principle of Murabaha and Wakalah structures,” he added.
The Bruneian | BANDAR SERI BEGAWAN