MyIPO, MDeC In Firmer Steps Towards IP-Based Financing In Malaysia

By Samantha Tan Chiew Ting KUALA LUMPUR, Dec 17 (Bernama) -- Intellectual Property Corp of Malaysia (MyIPO) and Multimedia Development Corp (MDeC) are taking firmer steps to promote intellectual property (IP)-based financing in Malaysia. A tea talk, 'IP System and Valuation', was jointly organised by MyIPO, MDeC and the Association of Islamic Banking Institutions Malaysia (AIBIM), gathering bankers to share and exchange ideas in promoting IP-based financing. The talk focuses on financial institutions in a bid to enhance IP knowledge among the bankers and expose them to the long-term benefits of IP-based financing. It attracted Affin Islamic Bank, Alliance Islamic Bank, AmIslamic Bank, Alkhair International Islamic Bank, Bank Islam, Bank Muamalat, Bank Kerjasama Rakyat, Bank Simpanan Nasional, CIMB Islamic Bank, HSBC Amanah, Hong Leong Islamic Bank, Kuwait Islamic Bank, Maybank Islamic, OCBC Al-Amin, Public Islamic, RHB Islamic, as well as other key government agencies. MyIPO's director-general, Azizan Mohamad Sidin, said it was crucial for the financial industry to gain exposure in IP as it was considered an important intangible asset in any organisations. "Banks focus on significant tangible assets. However, over the past decade, trade mark, patent and copyright have become more important as key assets," he said. Azizan said banks should recognise IP as tangible assets to enable businesses, especially the small and medium enterprises, to raise funds and expand operations. "It is timely for Malaysia (to promote IP-based financing) as the country strives to become a developed and knowledge-based economy by 2020," he said. AIBIM's executive director, Mohamed Rithuan Mohamed Shamsudin, said the Economic Transformation Programme defined opportunities for IP in at least seven sectors of the 12 National Key Economic Areas, including agriculture and business services. He said the syariah-compliant Commercialisation Innovation Fund (CIF) announced by Prime Minister Najib Tun Razak in the 2012 Budget and expected to be launched next month, was a good start in promoting IP. The RM500 million fund, committed by the Malaysian Islamic banks with the government subsidising two per cent of the financing rate, highlights the commercialisation of IP as a criteria to be eligible for financing. MyIPO and AIBIM are confident the CIF would be the benchmark for Islamic financial institutions to start IP-based financing and make IP as one of the criteria in order to obtain financing rather than focusing on cash flows. Meanwhile, Wong Jin Nee, a partner in Messrs Wong Jin Nee and Teo specialising in IP and technology, said IP-based financing was rare but not new as it was introduced as early as 1884 in Western countries. She said Lewis Waterman got a US$5,000 loan in 1884 to start pen manufacturing business secured by Waterman patent and Calvin Klein raised US$58 million in 1993 with royalties on use of CK brands on existing and future products. Other success stories are Michael Jackson, who borrowed US$200 million from Sony with Beatles' catalogues and Disney raised US$725 million against future earnings of Tokyo Disneyland based on the use of its brand. Wong said most bankers see IP-based financing as more risky and worried about the non-performing loans as well as difficulty in liquidating in event of default. "Lack of IP asset recognition on balance sheets and no established standardised valuation methodology are also among the blocking factors to this untapped gold mine industry," she said. However, she said, IP-based financing was indirectly happening as some banks gave loans to franchise businesses, adding, as a franchise was valueless if the IP was taken out from the operations. Both MyIPO and MDeC hope banks could start accepting IP as collateral together with other tangible assets, adding, putting a ratio between intangible including IP and tangible assets in approving loans should be the starting point for the banks. (US$1=RM3.18) -- BERNAMA