ONE-STOP DIGITAL FINANCING MARKETPLACE FOR MSMES
A fintech start-up is spurring better access to finance and targeted assistance for MSMES
IN TODAY’S digital-first world, financial technology (fintech) is poised to play a crucial role in empowering smaller businesses through different stages of growth.
Digital platforms that are targeted at supporting micro, small and medium sized businesses (MSMES) can create an enabling environment for better financial inclusion.
In this context, CGC Digital—a digital arm of Credit Guarantee Corporation Malaysia Berhad (CGC)—IS taking on the challenge to develop an accessible and efficient one-stop digital financing marketplace for MSMES, supporting their growth and increasing their financial resilience.
Lack of one-stop financing
Being a small business in today’s fast-paced digital world is a big challenge.
Especially in the wake of the global pandemic, many MSMES have been left grappling with the challenges of pivoting from analogue to digital and growing their business in an online world.
Many business owners today inhabit a “digital ecosystem”, defined as a network of interconnected digital technologies, platforms and services that interact with each other to create value for businesses and consumers.
Current rapid technological advancements in the financial services industry have led to the emergence of digital financial services and growth of various marketplaces and platforms offering various integrated solutions for different market segments.
However, despite these rapid advances, it appears that there is still a lack of a viable one-stop digital solution that holistically addresses the unique financing needs and issues faced by MSMES.
Challenging financial access
The crucial role of MSMES in driving Malaysia’s economic growth cannot be understated, considering that they make up 97.4% of business establishments and contribute 38.4% to the country’s total GDP.
In total, approximately 1.12 million business establishments in Malaysia are defined as MSMES and they employ 48.2% of the country’s population.
One of the most critical components for MSMES to successfully scale their growth is good access to finance and lines of credit.
Access to finance promotes good cash flow and financial flexibility, which in turn allows MSMES to embrace new opportunities when they arise, while sustaining their current operations.
However, insufficient cash flow and working capital are common barriers to MSMES’ growth aspirations. For many small businesses, opening a business banking account or applying for a loan can prove challenging due to having insufficient credit history and a lack of collateral.
Moreover, MSMES still face difficulties navigating complex financial regulations in the traditional banking system. Brought together, these hurdles negatively impact the financial health of MSMES and thus, their potential for high growth and business expansion.
Benefits of digital platforms and ecosystems
With their growing significance in driving economic expansion, it is important to empower MSMES with better access to financing and accelerate their business.
In this digital age, digital ecosystems or platforms can be a key catalyst to MSMES’ growth and competitiveness, by providing them with easy, convenient access to diverse financing options and solutions that are tailored to their unique financing needs.
As an alternative to physical financing environments, digital platforms have several characteristics which make it faster and easier for MSMES to get their needs met.
At the start of development, many platform creators will choose to prioritise value creation for their target market.
In other words, when creating the ecosystem, the focus is solely on the customer and understanding their challenges and needs. This allows for a more tailored approach to designing a system that is solutions-based and capable of addressing very specific problems or issues.
The second advantage of digital platforms is that they are largely data driven, and have the ability to amass a wealth of information about processes and transactions that take place on the platform, to generate insights and make strategic decisions.
Data analytics is one of the most important factors for any digital ecosystem and assists tremendously in optimising platform efficiency. Thirdly, digital platforms can also harness the power of automation technologies to make data-driven insights actionable and dynamic.
In the context of digital financial services, machine learning algorithms may be used to streamline existing business processes, enhance productivity and empower collaboration through seamless knowledge transfer.
Collectively, this serves to accelerate the high impact potential of the digital platform and enable it to provide greater value for its user base.
Innovative one-stop solution
In 2018, CGC had developed and launched IMSME, a financing and loan referral platform that was the first of its kind in Malaysia for MSMES.
Back then, the main function of the platform was to aggregate financing information from financial institutions, agencies and alternative financiers.
IMSME also serves to matchmake MSME users with compatible financing products and facilities and assist with applying for loan or financing from a single platform.
It was designed as a digital tool to provide MSMES easy and convenient access to information resources and financial services.
CGC Digital chief executive officer Yushida Husin said, “As a fintech subsidiary of CGC, we are geared to optimise IMSME into a fully integrated digital marketplace.
“With our commitment to advancing financial sector digitalisation via an Msme-centric approach, we aim to innovate the platform to become an embedded finance ecosystem that can support MSMES’ needs at each stage of their growth.”
While the core services of providing information and financing assistance remains, the optimised IMSME ecosystem will incorporate new expanded features, such as digital credit guarantee and other similar products and services, to make access to financing simpler and even more seamless for MSMES.
These features are ultimately aligned with the goal of transforming IMSME into a comprehensive, one-stop digital financing marketplace for smaller entrepreneurs and business owners.
“We believe partnerships with key players are essential to enable the platform to offer higher value-added services to MSMES.”
It aims to identify and collaborate with relevant partners that can synergise with the platform’s ecosystem and contribute to co-creating value in different areas. Through these efforts, its ultimate vision is for the platform to be a one-stop digital financing marketplace for underserved MSMES to access financial services and support that accelerate their business.
Alignment with NIMP 2030
As a digital initiative that aspires to bridge gaps faced by MSMES in accessing financing and driving greater financial inclusion, IMSME is highly relevant to the Madani government’s recently launched New Industrial Master Plan (NIMP) 2030.
It is a policy framework that lays out key goals and missions, as well as specific strategies, with the focus aimed at driving Malaysia’s industrial development over the next seven years.
Under the NIMP, CGC has been tasked to expand IMSME to show available funding options, including government funding and those from the capital market, as part of a wider goal to mobilise a comprehensive financing ecosystem for MSMES.
CGC Digital embodies those goals, and strives to take it a step further by innovating imsme’s core product into a comprehensive digital financial services marketplace. By engaging with different partners to bring an array of financing products and digital services to the platform, it aspires to provide greater value to MSMES through a targeted range of tailored solutions.
One of imsme’s goals is also to leverage artificial intelligence (AI) and machine learning technologies to create a better customer experience for business owners, and enable a seamless, frictionless journey while on the platform.
CGC Digital is committed to continue spearheading digital innovation and to be a leading fintech solutions provider in the digital financial services ecosystem.
It will continue to proactively innovate digital solutions to serve MSMES better and grow alongside them to help them succeed.