Avenue of Choice for your Investment and Fund Raising

Transcription

1 Avenue of Choice for your Investment and Fund Raising Catalyst for growth SHAREHOLDER BANKS: Edition : January 2017

2 IAP INTEGRATED SDN BHD ( W) 09-02, Level 9, Menara 2, Menara Kembar Bank Rakyat No. 33, Jalan Travers, Kuala Lumpur

3 WHO WE ARE About Raeed Holding Raeed Holdings Sdn Bhd (Raeed) is a consortium formed by six Islamic banking institutions in Malaysia namely Affin Islamic Bank Berhad, Bank Islam Malaysia Berhad, Bank Muamalat Malaysia Berhad, Maybank Islamic Berhad, Bank Kerjasama Rakyat Malaysia Berhad and Bank Simpanan Nasional. Raeed has set up a wholly-owned subsidiary, IAP Integrated Sdn Bhd to develop and operate a multi-bank platform known as the Investment Account Platform (IAP). Corporate Structure Raeed Holdings (investment holding company and the strategic driver for the group) IAP Integrated (owner and operator of IAP) 1

4 SUCCESS STORIES MADE POSSIBLE BY IAP KOBIMBING PERAK TRANSIT BERHAD Introducing Bank Muamalat's First Restricted Investment Account (RIA) via Investment Account Platform (IAP) Campaign Period: 26 April - 9 May 2016 For all individual and institutional investors Product Terms for Perak Transit Berhad Fund Raising Amount: RM10,000, Investment Tenure: 3 years Expected Profit Rate (EPR): 6.50% per annum Quarterly distribution of return and principal amount Rated bbb2 by RAM Solutions Sdn Bhd Minimum investment amount of RM10, Premature withdrawal is not allowed Principal is not guaranteed by the Bank or insured by Perbadanan Insurans Deposit Malaysia (PIDM) Contact Our Investment Banking Department *For more details on venture and terms & conditions, log on to: Sponsoring Bank Venture Owner and Operator of IAP ICT ZONE 2

5 IAP: A STRATEGIC INITIATIVE FOR THE ISLAMIC FINANCE INDUSTRY 1980s 1990s 2000s 2010s Phase I Building the foundation Phase II Institutional building Phase III Emergence of dual financial system Strengthen Islamic finance landscape Phase IV Diversification of business Strengthen Shariah compliance Specific legislation for establishment of Islamic banks and takaful operators Legislation enabling government to tap Shariah-compliant means of funding Distinct aspect of Shariah compliance in Islamic financial transactions Specific regulation allowing establishment of Islamic windows Formation of Shariah Advisory Council at BNM Establishment of Islamic interbank market Recognition on the dual financial system in Malaysia and BNM s mandate in developing the Islamic financial system Entrance of foreign Islamic banks and Islamic subsidiaries Establishment of various talent development institutions (e.g. IBFIM, INCEIF, ISRA) Recognition of investment account (IA) under IFSA which paves the way for diversification of Islamic banking business Requirement to observe end-to-end Shariah compliance by Islamic financial institutions Launch of MIFC as a national agenda to promote the Malaysian Islamic finance industry internationally Source: Bank Negara Malaysia Note: IBFIM Islamic Banking and Finance Institute Malaysia; INCEIF International Centre for Education in Islamic Finance; ISRA International Shariah Research Academy for Islamic Finance; MIFC Malaysia International Islamic Financial Centre Exciting future for Islamic finance The Islamic Financial Services Act 2013 (IFSA) sets an enabling environment for Islamic banks to diversify their roles through recognition of investment account (IA) as an alternative way of sourcing funds from the public. Both investors and ventures can benefit from greater adoption of risk-reward concepts, structured based on a wider range of Shariah contracts. IA requires strong intermediation roles of Islamic banks which professionally manage the IA funds in the best interest of investors. Engineering seamless investment experience To facilitate successful delivery of IA, the Investment Account Platform (IAP) has been developed. The IAP not only seamlessly embeds several financial intermediary functions within its system, but also serves as a centralised point in matching investors with viable ventures that suit their risk appetite. This serves as a crucial step for the industry in further diversifying the Islamic banking business, and ultimately benefiting the real economy. 3

6 NEW WAY OF INVESTING AND RAISING FUNDS What is IAP? The Investment Account Platform (IAP) is a multi-bank platform that facilitates channelling of funds from investors to finance viable ventures. Funds mobilised via IAP are intermediated by participating Islamic banks through investment account (IA) products. IAP allows investors to view and choose from a wide range of ventures sponsored by different Islamic banks for the investors to invest in. With IAP in place, several key functions of Islamic banks in managing IA are embedded within its system, thus enabling IA products to be delivered in an efficient and seamless manner. How it Works Sponsoring Banks (SBs) Investors (Sources of fund) ISLAMIC BANK Ventures (Users of fund) Channel funds to ventures of their choice Provide financing Strong roles played by banks, in line with their fiduciary duty Individual investors Corporate and institutional investors Islamic banks Government (to support target industries) Due-diligence Performance monitoring Suitability assessment Investment management Target ventures include those businesses with viable projects, and new growth industries Facilitated by Obtain Information Choose Investment $ Raise Funding Promote & Advertise Source: BNM Key features of IAP An avenue for Shariah- compliant investment and financing Transactions regulated by the Islamic Financial Services Act 2013 (IFSA) and Development Financial Institutions Act 2002 (DFIA) Credit assessment and screening on the listed ventures by participating Islamic banks Ratings on the listed ventures by a reputable rating agency Compliance to disclosure standard on ventures facilitate investors informed decision making User friendly and easily accessible anywhere, anytime Open to different types of business and ventures of varying size and industries 4

7 WHAT IS IA AND HOW IT RELATES TO IAP IA is a recent product offering by Islamic banks that provides investors with an opportunity to directly invest and share the profits from Shariah-compliant investment activities. Islamic banks undertake significant roles in IA transactions in intermediating funds from investors. Roles of Islamic banks in operationalising IA 1. Acceptance of funds 2. Application of funds Individual and institutional investors Ventures INVESTORS PLACE FUNDS IN ISLAMIC BANKS UNDER IA Conduct suitability assessment to assess eligibility and risk appetite of individual investors Provide disclosures on the underlying ventures and their related risk-return profiles Recommend appropriate products in line with investors risk appetite Propose Shariah contracts which will define the intermediary role and basis for attributing returns generated to the banks and the investors ISLAMIC BANK 3. Continuous roles ISLAMIC BANKS CHANNEL IA TO FINANCE VENTURES Match funds received with underlying ventures according to the investment mandate Conduct due diligence on prospective ventures to ensure the risks undertaken are aligned with the investment mandate Ensure proper governance to safeguard investors interests and the banks reputation Maintain clear separation of funds to facilitate distributions of principal and returns, and resolution on winding-up Conduct regular monitoring Report performance to investors Distribute profit to investors at preagreed term Identify exit mechanism and perform recovery, if required Source: BNM Key features of IA Investors can specify where funds are channelled to (i.e. choice of underlying ventures to invest in) IA represents the contractual relationship between the investors and the Islamic banks Investors may define investment mandate and eligibility criteria for the financing (e.g. investment tenure and types of industry) to Islamic banks Returns of IA are based on the performance of underlying ventures (i.e. Islamic banks will enter into a different contractual relationship with venture owners) Similar to other investments in the market, funds placed under IA are not capital protected. IA is not guaranteed by PIDM 5

8 Investing via IAP GROW YOUR FUNDS WITH CONFIDENCE Why should I invest via IAP Potential high returns: Under IA, returns to investors are based on performance of the underlying ventures that they choose to invest in. Possible upside returns may be generated from the profit of debt-based financing under a broader set of credit criteria and more efficient capital and liquidity management strategies of Islamic banks in offering equity-based financing structures Bank-intermediated: Islamic banks undertake significant roles in intermediating investors funds including filtering of viable ventures, conducting suitability assessment on individual investors and continuous performance monitoring of underlying ventures Independent rating on ventures: Performed by a professional rating agency with extensive experience in rating of financial instruments, facilitating informed decision making by investors Broader choices: Investors can filter the ventures listed based on their desired criteria. This is especially useful to investors with specific investment mandates User friendly: IAP is a platform that is accessible anywhere, anytime, with some processes conducted online What I need to know about IAP investments Investment fund size: Investment participation per investor shall be the multiples of minimum investment amount at the point of offering Underlying currency: Ringgit Malaysia (Investment denominated in foreign currency will be offered in the future) Tenure: The tenure of IA shall match the tenure of underlying financing asset Payment frequency: Principal and profit will be paid either periodically or upon maturity Performance report: To be provided on periodical basis Redemption of investment: At maturity date Profit distribution: Based on profit sharing ratio or expected profit rate Loss treatment: Losses will be borne by investors provided that they are not due to Islamic bank s breach of specified terms 6

9 Invest via IAP today This web-based platform incorporates simple and user-friendly features as well as supporting tools that facilitate informed investment decision making and smooth investment process. Is IAP regulated? The IA offerings and transactions conducted by Islamic banks on the platform are regulated under IFSA and DFIA. Simple steps for investment Register as an IAP user View and select venture Undertake suitability assessment Islamic bank to facilitate payment of the investment Islamic bank to create Investment Account for investors Receive periodical report on venture Receive profit and principal (Processes conducted through ) Suitability Assessment (SA) on investors Who should undertake SA Individual investors are required to undertake SA under BNM requirements. Institutional investors are not required to do so as they are deemed to have sufficient resources in supporting informed investment decision making. Why is SA required SA is a mechanism for Islamic banks to assist investors to choose ventures which are in line with their respective risk appetite. Investors would be alerted should they choose to invest beyond their risk tolerance. How is SA performed on IAP SA function is embedded on IAP. Investors will be prompted to undergo SA before choosing to invest in any ventures listed on the platform. The SA score obtained by each investor will be valid for one year. IAP will also alert investors should they select ventures that are beyond their risk appetite. Investors will be asked to seek additional consultation at dedicated branches of participating Islamic banks before proceeding with their investment decision. What will be assessed in SA SA will assess investors on three key areas namely financial capabilities, investment needs and appetite, as well as investment knowledge and experience. 7

10 Raising funds via IAP: FINANCE YOUR BUSINESS EFFICIENTLY Why should I raise financing via IAP Competitive financing terms: Financing application by ventures can be assessed simultaneously by all participating Islamic banks. Venture owners can then choose the best financing offer that suits their needs Variation in financing structures: Diverse types of financing are possible on IAP including debt-based financing, equity-based or hybrid of the two Visibility: IAP provides access to a broad range of individual and institutional investors, thus placing ventures within the radar of potential customers which privilege is normally available to established companies Financing facilities available on IAP Capital expenditure A financing facility provided for a specific amount and to be paid within a specific timeframe as agreed upfront To fund short or long-term financing needs Working capital Provide short-term financing to ventures for working capital requirements Per project basis To be structured according to specific project financing requirement No specific timeframe of payment features User friendly: IAP is a platform that is accessible anywhere, anytime, with some processes conducted online What I need to know about raising funds Amount RM500,000 and above Types of ventures Any types of business in various industries (including SMEs, PLCs, MNCs, GLCs, federal and state-owned institutions) Tenure Up to 5 years (longer tenure can also be provided with advice from Islamic banks) Assessment criteria Creditworthiness and viability of the ventures 8

11 SUBMIT YOUR FINANCING APPLICATION TODAY 2 Islamic banks to conduct due diligence on venture application Submit application online (subsequent followups by Islamic banks)* Negotiation of financing terms and conditions Islamic banks to disburse funds upon successful fundraising Processes conducted through Independent rating on venture Islamic banks to float venture on IAP 5 *Note: Venture owners may also apply for fundraising via IAP by visiting the branches of participating Islamic banks What are the costs involved? Financing rate which will be negotiated with Islamic banks Listing and rating fees which are commercially competitive How much information do I need to disclose? To Islamic banks and RAM Similar to common financing applications to banks **Note: Product Disclosure Sheet (PDS) is a product-specific disclosure about a particular venture to be prepared by Islamic bank together with the venture owner to facilitate informed decision-making by potential investors. Why? Vital to facilitate assessment on viability and creditworthiness of ventures and projects To IAP users Details on the company, project and financing required, PDS** as per requirement of BNM as well as ratings assigned by RAM Why? For ventures to be able to earn investors trust to invest in their business or projects during listing on IAP To investors Progress of the venture and payment of profits and principal is on a periodical basis Why? To report on the performance of ventures to investors 9

12 Independent rating on ventures: ASPIRING CONFIDENCE AMONGST INVESTORS Why is credit rating necessary Before ventures are listed on IAP, they will be independently reviewed and assigned a credit rating by a professional rating agency. This credit rating is to assist potential investors in making informed investment decisions. For institutional investors, a credit rating is useful in monitoring compliance with their respective internal risk limitations. Process flow of venture assessment RAM PROFESSIONAL RATING AGENCY IAP ISLAMIC BANK VENTURE Provides information to Islamic bank Conduct internal credit assessment Forward venture information to rating agency Conduct independent credit assessment and ratings Forward rating and its review to Islamic bank for listing on IAP Post venture information and rating review on the platform What does credit rating mean Credit rating reflects opinions on the capacity and willingness of a venture to meet the payment of capital and expected returns on a full and timely basis from the perspective of the rating agency. While credit ratings can be used as a reference to gauge an appropriate level of returns considering the risks involved, it is not a recommendation to buy, sell or hold investment, and does not signify any measure to define good or bad ventures. What I need to know about credit rating on IAP Credit rating will be conducted by RAM which has over 25 years of experience in rating bonds and sukuk Ratings are benchmarked against existing methodology and rating scale which institutional and corporate investors are familiar with Ratings are one-off, issue-specific and reflect the position at the inception of the financing Investors will have access to a rating rationale for each rating on ventures listed on IAP 10

13 POTENTIAL STRATEGIC COLLABORATION TO ACHIEVE COMMON OBJECTIVES How is IAP useful to my institution Various institutions have specific mandates or objectives that need to be achieved. Strategic collaborations can be explored by these institutions with IAP and Islamic banks to achieve common objectives. Rating scale and definitions used on IAP Rating Symbol* Credit Quality aaa Superior aa High a Adequate bbb Moderate bb Low b Very Low c High likelihood of default d Default * Suffixes 1, 2 and 3 are applied to ratings in the six rating categories from aa to c to denote the higher and lower end of the respective rating band (e.g. bbb1, bbb2, bbb3) Efficient channelling of grants or funding POTENTIAL COLLABORATION New investment avenue Enhanced financing opportunities for strategic ventures Institutions managing government grants or dedicated funds for specific target groups TYPES OF INSTITUTIONS Pension funds, insurance/takaful companies, fund management companies etc. Institutions with mandate to develop targeted industries Efficient channelling of grants or funding Through IAP, institutions can leverage on the strength of Islamic banks to assess the viability of ventures that can receive the grants managed by these institutions. The institutions would also receive regular progress reports on the ventures. By streamlining the assessment criteria between the institutions and Islamic banks on IAP, they can also open these ventures to be invested by the private sector, therefore further expanding the potential users of the grants available to benefit more ventures. New investment avenue for cornerstone investors Institutional investors can establish a special scheme with a dedicated amount of funds to be channelled in ventures that meet certain set of criteria set by the investors. In return, the investors can be allocated with a portion of investment in those qualified ventures, thus assisting the investors in achieving their target return. Enhanced financing opportunities for strategic ventures Institutions with mandate to develop specific industries can support ventures in those industries by providing a letter of support backing these ventures. This will enhance opportunities of these ventures in obtaining financing from investors via IAP. 11

14 VALUE PROPOSITIONS OF IAP How is IAP different from other fund-raising platforms There has been an emergence of technology-based fund-raising platforms that allow investors to choose the underlying ventures for them to invest in. A key difference of IAP is the intermediation roles of Islamic banks embedded in the operationalisation of IA offered on the platform. IAP also features independent rating on the ventures intended to facilitate investors in making informed investment decisions. IAP also targets a wider range of underlying ventures such as SMEs, listed firms and multinational companies to raise funds on the platform. This is in contrast with some other fund-raising platforms which are aimed to enhance the financial accessibility of start-ups and SMEs and can be equity-driven. 12

15 Interested? Register as an IAP user today! To register and for further information on IAP, please visit our website at You may also us at DISCLAIMER The content of this brochure is for general information purposes only. The content contained does not constitute legal, financial or investment advice and neither does it make any recommendation or endorsement regarding the product mentioned herein. Although care has been taken to ensure the accuracy of the information within this brochure, Raeed Holdings and IAP Integrated do not warrant or represent, expressedly or impliedly as to the accuracy or completeness of the information herein. Raeed Holdings and IAP Integrated do not accept any liability for any investment decisions made on the basis of this information. You are advised to seek independent advice and/ or consult relevant laws, regulations and rules prior to investing or undertaking any financial transaction.

16 IAP INTEGRATED SDN BHD ( W) 09-02, Level 9, Menara 2, Menara Kembar Bank Rakyat No. 33, Jalan Travers, Kuala Lumpur