Banks Urged To Explore IP-Backed Financing For Businesses
PETALING JAYA, Nov 2 (Bernama) -- Banking institutions are urged to tap intellectual property (IP)-backed financing to broaden funding opportunities for businesses, said Deputy Investment, Trade and Industry Minister Sim Tze Tzin.
He said the Malaysian Industrial Development Finance Bhd (MIDF) has introduced IP-backed financing to demonstrate that intangible assets could be used as collateral to help businesses secure funding.
"I think most banks are not familiar with these new approaches to financing.
"That is why MIDF is taking the lead to show other banks that this is possible and feasible, with the right framework, contractual arrangements and partnerships, as technical partners are needed to verify the technology," he told a press conference after the launch of IP-Backed Financing Pilot Project Final Report here today.
Meanwhile MIDF chief executive officer Azizi Mustafa said the subjective nature of IP valuation and the lack of a secondary market remained key challenges in encouraging financial institutions to accept intangible assets as collateral.
Unlike land, where various external factors determine its value, intangible assets are different because their value can change significantly over time, he said.
"If a borrower uses IP as collateral but is unable to repay the loan, we need to consider where the asset can be sold and how much it would be worth.
“We also need to determine whether ownership or patents can be transferred to a new owner, these are among the reasons commercial banks are currently reluctant to accept IP as collateral," he said.
Formalised through a memorandum of understanding between MIDF and World Intellectual Property Organization (WIPO), the pilot project represents WIPO's first Intellectual Property Financing Pilot Project globally.
The pilot project positioned Malaysia among the pioneers in exploring how IP can be incorporated into financing decisions and unlock new growth opportunities for innovative businesses.
"Beyond financing approvals, the pilot project enabled MIDF and its partners to develop practical frameworks covering intangible assets valuation, governance, legal documentation, risk assessment and monitoring.
"The initiative also strengthened institutional capabilities and established valuable knowledge that can support the future development of IP financing in Malaysia," MIDF said in a statement.
-- BERNAMA