Taking into account the fact that SMEs are a critical component of the Malaysian economy, one would expect that the funding ecosystem in Malaysia would be a healthy and vibrant one.
Over the past 2 decades, this has been slowly forming shape; such initiatives have helped SMEs to contribute more than a third of the gross domestic product (GDP) of Malaysia, in addition to being the drivers providing job opportunities to more than four million workers.
While the highly regulated banking institutions are still the main source of financing for SMEs, (they provide more than 90% of total SME financing), Development Financial Institutions (DFIs) also play a key role.
Introduced by the government many years ago, these DFIs have a specific mandate to develop and promote key sectors that are considered of strategic importance to the overall socio-economic development objectives of the country.
With SMEs being one of these strategic sectors, the DFIs have been critical in providing a range of specialised financial products and services to suit the relevant specific needs.
Ancillary services in the form of consultation and advisory services are also provided by DFIs to nurture and develop SMEs as well.
These DFIs therefore complement the banking institutions and act as a strategic conduit to bridge the gaps in the supply of financial products and services to SMEs for the purpose of long-term economic development.
In essence, the DFIs have to a large extent contributed to the development and growth of SMEs over the years.
However, with the recent change in government, a lot of initiatives that were in existence for SMEs have been put on hold, as the current administration seeks to correct a lot of imbalances in the financial management of the country up to date.
As a result, SMEs have had to look for alternatives, with one area being crowdfunding, the development of which the government has been encouraging more than it did before.
Regulated by the Securities Commission of Malaysia (SeC), the Equity Crowdfunding Framework put in place has widened access for SMEs and start-ups to obtain market-based financing.
More initiatives are being planned, with mention of rollouts in the 1st quarter of 2019. We of course look forward to positive news for all.