What are the differences between Securities Crowdfunding (SCF) and Stock Exchanges? 

In Indonesia’s capital markets, there are two institutions that offer investment services: Securities Crowdfunding (SCF) and the Stock Exchange. Both play an important role in connecting securities issuers with investors. Let’s explore the differences between both.

1. Definition and Mechanism 

Securities Crowdfunding (SCF)

Securities Crowdfunding (SCF) is an alternative financing scheme that allows issuers to sell their securities in the form of shares, debt securities, or sukuk directly to investors through an electronic system. The scheme primarily targets middle-class businesses, startups, micro, small, and medium enterprises (MSMEs), and non-listed companies. Issuers can raise capital more easily and efficiently through SCF platforms, which usually operate online. These platforms facilitate the fundraising process by directly connecting issuers with potential investors, reducing the need for traditional intermediaries such as banks or securities companies.

In addition, SCF enables the diversification of funding sources for small and medium-sized enterprises that may find it difficult to access conventional capital markets. By using SCF, issuers can also build a community of investors who are loyal and committed to the company’s growth. SCFs are generally considered to provide simpler and more understandable access to the capital markets for both issuers and investors. 

Stock Exchange

On a stock exchange, securities such as stocks, bonds, and sukuk are traded. Investors buy and sell securities on the stock exchange with the goal of profiting from changes in their price (capital gains). The stock exchange has a central role in connecting securities issuers with institutional and individual investors, creating a liquid and transparent market.

Through the stock exchange, companies can access greater capital from different types of investors, including pension funds, investment funds, and retail investors. The stock exchange acts as an effective pricing mechanism, determining securities prices based on market supply and demand.

In addition, the stock exchange plays a role in providing accurate and up-to-date market information, assisting investors in making more informed investment decisions. Strict regulation and constant supervision by capital market authorities also help to maintain market integrity and stability. Stock exchanges not only support economic growth by facilitating the transfer of capital from investors to companies but also play an important role in strengthening corporate governance through strict transparency and reporting requirements.

The stock exchange can be considered the primary market in the capital market sector, offering a wide range of investment opportunities through a variety of mechanisms. The stock exchange is also the place where the majority of the largest companies, both in Indonesia and around the world, offer their shares and become an investment option for investors. 

2. Types of Securities Offered

• Securities Crowdfunding (SCF): Investors in SCF can purchase two types of securities: Equity securities (shares) and debt securities, or sukuk (EBUS). As such, SCF provides investors with the flexibility to choose instruments that suit their risk profile and investment objectives. 
• Stock Exchange: Stock exchanges offer various types of securities, ranging from stocks and bonds to asset-backed securities (EBA) and real estate investment funds (REITs). In general, investment on the stock exchange can be divided into two categories: direct investment by buying securities that are directly related to issuers, such as stocks and bonds, and indirect investment by buying investment products that contain various securities portfolios, such as mutual funds and ETFs. 

3. Investment Objectives 

Securities Crowdfunding (SCF): The investment orientation in SCF is more about providing returns from real-sector businesses. Investors in SCF contribute to the company’s growth and expect to benefit from good business performance. The low liquidity of SCF’s securities, with shares tradable only once every 6 months and sukuk non-tradable, further reinforces this. 

Stock Exchange Capital: Gains are the focus of investing in the stock exchange. Investors buy securities in the hope that their price will rise so that they can sell them at a higher price in the future. The stock exchange also provides liquidity for traded securities. However, some securities on the stock exchange, like some sukuk and bonds, are not tradeable, leading investors to expect profits from profit sharing, ujroh, or interest based in conventional system. 

Understanding the differences between SCFs and stock exchanges can be beneficial. These two institutions have different positions in the capital market ecosystem. SCFs serve as a simple entry point to the capital market for MSMEs and first-time investors, while stock exchanges represent the bulk of capital market activities and provide a wide range of assets and mechanisms. Investors can choose investment instruments from these two institutions according to their objectives and risk profiles. We hope this explanation helps.

Wallahu a’lam 

References

• (2023, March 22). Sudah Tahu Perbedaan antara Securities Crowdfunding (SCF) dan P2P Lending ? [Review of Sudah Tahu Perbedaan antara Securities Crowdfunding (SCF) dan P2P Lending ?]. Shafiq.id. https://www.shafiq.id/berita/39/sudah-tahu-perbedaan-antara-securities-crowdfunding-scf-dan-p2p-lending/baca 

• Ulfah, F. U. (2021, January 4). Ada ​Security Crowd Funding, Pasar Modal Diramal Lebih Ramai. Bisnis.com. https://market.bisnis.com/read/20210104/7/1338497/ada-security-crowd-funding-pasar-modal-diramal-lebih-ramai 

• Times, I. D. N., & Santoso, R. A. P. (n.d.). Apa Itu SCF? Ini Penjelasan, Syarat dan Bedanya dengan Pasar Modal. IDN Times. Retrieved May 29, 2024, from https://www.idntimes.com/business/finance/raihan-ali-putra-s/apa-itu-scf-ini-penjelasan-syarat-dan-bedanya-dengan-pasar-modal