Tuesday, December 15, 2015

SME Funding in Malaysia - Some thoughts

It is heartening to see the "renewal of vows" of sorts on the part of the Malaysian government towards small and medium enterprises (SME). There is an awareness that in most developed countries SMEs contribute 65% employment and 50% of the GDP. These are staggering numbers.

But we have found that this generic generalisation hardly does justice to SMEs in Malaysia simply because of the diversity of the economic and commercial activities undertaken by Malaysian SMEs. The official definition of an SME (circa. 2013) is an objective one that states as follows-

Manufacturing: Sales turnover not exceeding RM50 million OR having full-time employees not exceeding 200 workers; and 

Services and other sectors: Sales turnover not exceeding RM20 million OR full-time employees not exceeding 75 workers.

Within this classification is pretty much everyone that runs a business in Malaysia. It ranges from the sexiest teenage virtuoso working on the latest smartphone app in Cyberjaya to the kedai kopi operator in Kinarut. This observation is not meant to trivialise the position but, on the contrary, to highlight the sheer diversity of SME activities.

In fairness to the Malaysian government, there is a finite amount of financial resources to allocate to the fostering and development of SMEs. Specific sectors have to be picked. Those that has the highest economic impact and multiplier effect will be selected. Moreover, any assistance is, at best, in the form of mentoring, benchmarking and soft loans.

We believe there is scope for Malaysia to focus on the creation of another eco-system that will match investors with SMEs in a virtuous cycle. 

The crowdfunding platform is excellent and more needs to be done to create awareness of this funding solution beyond the tech start-ups. 

We will have more on this topic in due course.