Digital transformation for businesses
(MALAYSIA Digital Economy Corporation) Mdec’s aspiration is to firmly establish Malaysia as the Heart of Digital Asean, a regional digital powerhouse launching global champions to lead the Fourth Industrial Revolution (4IR), ensuring the digital economy will drive shared prosperity for all Malaysians by accelerating our digital economy growth, ensuring it is inclusive and rewarding for all, focused on the key drivers: empowering Malaysians with digital skills, enabling digitally-powered businesses, and driving digital sector investments.
At the cusp of the 4IR, Malaysia is blessed with the chance of reengineering the human experiment using technologies that decentralise authority and de-emphasise divisions along the lines of colour, creed and country – what the Japanese have coined as “Society 5.0” – and we have adapted as “Malaysia 5.0”.
The term describes the next stage of the evolution of societal communities.
The quest for Society 5.0 is built around the needs of a humancentred society. Mdec envisions playing a leading role in catalysing this transition to Malaysia 5.0 as a new narrative for introducing emerging technologies, which are essential tools in the new Malaysia 5.0 digital economy.
With Malaysia 5.0, it can contribute to a more sustainable and circular economy, where greater wellbeing is possible for all citizens regardless of age, ethnicity, and class.
Malaysia has over one million SME making up 98% of total businesses, and the majority are micro-SME with 21% owned by women. SME face challenges like lack of business connections, limited awareness of tools, access to funding, education, lack of internet presence in a world going full digital.
Of all these businesses, only a third of them actually have employees. Micro-SME are mostly “self-employed” individuals operating a very small unincorporated business which may or may not be the owner’s principal source of income.
SME are key to strengthening productivity, delivering more inclusive growth, and adapting to the major transformations of our time. They are very heterogeneous in their characteristics and performance, whose productivity performance varies across firms.
The persistent gap between SME and large firms affects growth potential and income distribution, so that effective measures enabling SME to scale up and innovate can have a considerable economic and social impact, participate in the global economy, innovate and grow.
One particular industry where Malaysian SME could become a world pioneer in is Islamic fintech. Already a world leader in Islamic finance, Malaysia is in a strong position to harness Islamic fintech opportunities.
According to figures from the International Monetary Fund (IMF), Islamic bank loan growth expanded by 8.9% year-on-year in 2018, compared with only 2.5% for conventional banks, highlighting rising demand around the world for syariah-compliant financial services. Islamic finance is now entrenched in Malaysia, accounting for 32% of financing to customers.
Yet, according to the IMF, Islamic fintech is still in its infancy in Malaysia with just a handful of startups and SME, and a much less developed sector compared with countries such as Indonesia.
In Malaysia, the growth of Islamic fintech can impact development in rural areas among ethnic Malays, offering this back-bone community a unique financial-inclusion opportunity to catch up and increase contribution to our National development.