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Malaysia SMEs to get more options to raise capital for growth

According to a recent report, the entry of Singapore-based private investment platform into Malaysia will provide small businesses with more options to raise capital for growth.

The investment platform was recently appointed by the Securities Commission (SC) Malaysia as the seventh Equity Crowdfunding (ECF) platform.

The investment platform will provide a comprehensive suite of capital raising services targeted at local unlisted growth companies that form the backbone of the economy. This will include local cafés and retail stores to larger companies in the fields of education and wellness.

The global economy is increasingly being shaped by SMEs, who often face challenges obtaining growth capital, noted the vice president of growth ecosystem development at the Malaysia Digital Economy Corporation (MDEC).

He noted that the investment platform’s launch in Malaysia comes at a timely moment as the government advocates a shift towards high value-added activities, particularly in knowledge-intensive industries. This covers the digital transformation of the economy by tapping on the potential of big data and fintech.

The fintech company adopts a technology and data-driven approach to connect quality businesses with growth capital, in tandem with the Malaysian government’s effort to promote the use of technology to drive financial inclusion and equitable opportunity.

It was noted that the investment platform’s entry into Malaysia is a testament to the country’s attractiveness as an investment destination. The government stated they were excited to welcome the region’s largest private investment platform into the country’s market.

It was also noted that as a government agency, MDEC works closely with industry players, regulators, start-ups, and accelerators in nurturing the nation’s fintech ecosystem. Government leaders look forward to partnering the investment platform and others like it to create a more vibrant environment and benefit businesses in Malaysia.

Applications on the investment platform have the potential to reach a global network of over 10,000 investors and partners. As it is an online platform, price discovery is granted to the fundraiser who then has the flexibility to compare these offers that may best suit their stage of growth or other strategic requirements. This unique element is a key differentiator that sets this particular investment platform apart from traditional financing options.

A homegrown pioneer in on-demand mobile car care services will be one of the first companies to be launched on the investment company’s Malaysia platform. In addition, the Klang Valley-based startup plans to use proceeds from this round of fundraising to launch its affiliate programme across Malaysia and to initiate licensing of its Software as a Service (SAAS) automotive solution in the US.

SMEs are fast becoming a cornerstone of the Malaysian economy, contributing 37.1% to the country’s GDP and 66% of the nation’s workforce in 2017.

Despite the vibrant SME landscape, insufficient access to capital has inhibited their ability to grow. Access to financing remains a key challenge for local SMEs today, as highlighted at the recent SME CEO Forum 2018.

Other barriers to growth include lack of access to the latest business technologies and platforms to reach the right investors during early stages.

A survey from 2017 conducted by the Associated Chinese Chambers of Commerce & Industry of Malaysia (ACCCIM) determined that funding schemes provided by the government were being underutilised due in part to convoluted application procedures and insufficient loan amounts.

As of June 2018, the Registered Market Operators authorised by the SC have collectively raised a total of RM118mil in capital for more than 300 micro, small, and medium enterprises, demonstrating the potential of alternative financing platforms.

Meanwhile, the investment platform has tied-up with a local investment firm and the two will assist each other in deal origination with the common ambition of supporting Malaysian companies.

The general partner of the local investment firm noted that the partnership will connect local companies to their network of investors from across the globe, helping them grow and scale up.

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