“Interest” is defined under section 2(1) of the Interest Schemes Act 2016 as:
“any interest or right to participate, whether enforceable or not and whether actual, prospective or contingent whether in Malaysia or elsewhere-
- in any investment scheme;
- in any time-sharing scheme; or
- in any recreational membership scheme.”
- any shares in or debenture of corporation;
- any capital market product under the Capital Markets and Services Act 2007;
- any interest in a partnership agreement save for the types of agreement specified under s.2(1)(iii)(A) and(B) of the Interest Schemes Act 2016; and
- any participatory interest in any product regulated under the Financial Services Act 2013, Islamic Financial Services Act 2013 and Development Financial Institutions Act 2002.
Interest scheme involves the pooling of a financial contribution from the public in exchange for an interest in a particular scheme. While the traditional means of business involve exchanging money with outright ownership of property or rights, by virtue of being dynamic, business continues to evolve. Thus, business creativity has created new classes of assets and this include “interest”, which connotes that a right obtained by the purchasing public may be temporary, fractional or not outright. There can be many forms of interest and only limited by the boundary of creative business minds.
Driven by the opportunity to get easy credit or funding from the public under the guise of innovative and clever business schemes, some irresponsible business operators actively offer interest to the public to achieve a bigger pool of financial contribution in unregulated environment. If left unchecked, there could be far reaching public implications. The Interest Schemes Act 2016 was introduced to address such potential problems by providing strong regulatory control and investor protection safeguards.
For the public intending to diversify their investment portfolios to meet their unique investment goals, interest scheme offers another option to the investing public by participating in a different asset class investment platform subject to careful consideration of the potential benefits against the risks involved.
For companies especially the Small and Medium Enterprises (SMEs), depending on their business strategies, interest scheme offers them an alternative method of funding their business growth beyond the traditional financing options.