ICMR chairman Munir Majid said there is a concerning trend of SMEs remaining stagnant solely to capitalise on subsidies, affecting their potential to significantly contribute to the GDP.
“In Malaysia, we have the third-highest number of registered SMEs in the Asean region, with approximately 97.4% of business establishments falling under the category.
“SMEs contributed 38.4% of Malaysia’s GDP in 2022, reflecting a gradual increase from 37.0% in 2015. Something must be wrong. There must be some bridging that must be done,” he said.
Delivering the keynote address at the launch of ICMR’s latest research report titled “Market-Based Financing for SMEs in Malaysia: Issues, Challenges, and Way Forward”, Munir said SMEs were not merely the “backbone of our economy”.
“They are the very drivers of innovation, job creation and sustainable development from startups.”
He acknowledged that the country is committed to fostering SME growth through strategic policies and initiatives implemented over the years, citing the 12th Malaysia Plan, and the National Entrepreneurship Policy 2030 as examples.
“But this is not enough. Our country has laid down the foundation, but we have not made (substantial progress),” he said.
Market-based financing critical for SMEs
ICMR’s study, which surveyed 401 respondents from startups, SMEs and mid-tier companies (MTCs), revealed that 64% of SMEs have sought external finance, primarily from the banking sector.
Market-based financing, which is less utilised, is considered for business expansion.
“Among respondents with no experience in market-based financing, 61% were aware of its availability, while 39% remained unaware,” read the report.
However, 85% of the respondents expressed a willingness to consider market-based financing with better understanding and trust.
“This willingness is contingent on a better understanding of market-based financing, trust, ownership control and concerns about exit strategies, underscoring nuanced considerations across different business sizes,” it said.
The report said challenges in adopting market-based financing include intricate procedures, stringent requirements, high funding costs, and limited outreach.
“Unlike banks, where information can be obtained by approaching a branch, SMEs reported unfamiliarity with where and how they can access market-based financing,” it said.