Funding Societies Malaysia, a Southeast Asia’s SME digital finance platform, has partnered with the Centre for Entrepreneur Development and Research (CEDAR), a division of SME Bank Malaysia Berhad, to provide RM50 million (US$10.75 million) in financing for Malaysian small and medium enterprises (SMEs).

This agreement was formalized at a recent signing ceremony.

The partnership aims to address the RM290 billion (US$68.21 million) financing gap reported for Malaysian SMEs in 2022 by the Securities Commission Malaysia.

Funding Societies will offer financing solutions, including Shariah-compliant options, to eligible businesses. The focus will be on vendors connected to government entities, government-linked companies, and multinational corporations.

CEDAR will use its digital platforms, such as ScoreXcess, to support these financing offerings. Additionally, roadshows will take place at SME Bank’s 19 enterprise centers nationwide to promote financial literacy and digital adoption among SMEs.

🔗 Source: Funding Societies

🧠 Food for thought

1️⃣ Malaysia’s SME financing gap persists despite years of intervention

The RM290 billion financing gap highlighted in the Funding Societies-CEDAR partnership reflects a long-standing structural challenge in Malaysia’s economy.

As early as 2013, researchers identified a persistent mismatch between SME funding demand and institutional supply, with banks citing inadequate qualified applications while SMEs reported excessive barriers to accessing loans 1.

Despite SMEs making up 98.5% of Malaysian businesses and contributing 36.6% to national GDP, traditional financing mechanisms have consistently fallen short of meeting their needs 2.

Government initiatives including grants, guarantees, and specialized markets like Bursa Malaysia’s ACE Market (launched 2009) and LEAP Market (2017) have made incremental progress but failed to close the substantial gap 2.

The persistence of this financing shortfall explains why alternative financing platforms have gained significant traction, with P2P lending alone raising RM1.14 billion through nearly 16,000 campaigns by 2020 3.

2️⃣ Digital platforms are transforming SME finance access where traditional banks struggled

The partnership between Funding Societies and CEDAR represents a growing trend of digital-first solutions addressing challenges traditional banks couldn’t solve efficiently.

Despite intensified focus on SMEs by Malaysian banks, with SME financing growing from 37.6% to 48.7% of total outstanding financing between 2010-2018, nearly half of SMEs still reported that financial products didn’t meet their needs 4.