Small and medium-sized enterprises (SMEs) play an essential role in the economic development of ASEAN countries. SMEs affect national GDP and create employment opportunities for the population. Malaysia is no exception. Past data shows that Malaysian SMEs have a significant impact on national economic development. And what about today? What is the role of local SMEs in the Malaysian economic landscape?
Economic backbone
Malaysia’s economic development is built on the strength of its small and medium-sized enterprises (SMEs). According to findings by SME Corp Malaysia, about 97% of business establishments in Malaysia are SMEs. By 2015, they are responsible for about 36% of GDP, along with over 65% of overall employment. National SMEs also contribute to 18% of the country’s exports.
The general trend shows that SME contribution to the national economy has been increasing since 2005. In 2005, Malaysian SMEs contributed to 29% of GDP and 57% of employment. In 2009 the numbers grew to 32% of GDP and 59% of employment. By 2013, Malaysian SMEs was still on the move by contributing 33% of GDP and 58% of national employment. National SME growth is aligned with the 2012-2020 SME Masterplan created by the government, which aims for Malaysian SMEs to contribute 41% of national GDP and 23% of exports by 2020.
Malaysian SMEs are also spreading throughout the country. However, 60% of Malaysian SMEs are concentrated in five regions: Selangor (20%), Kuala Lumpur (13%), Johor (11%), Perak (9%) and Sarawak (7%). All the same, the numbers indicate that SME businesses are growing in Malaysia.
Same old obstacle – lack of financing
Like most SMEs in the world, Malaysian SMEs face the same challenge: lack of financing. A survey held by the SME Corp in 2016 found that about 44.8% of respondents face cash flow or liquidity problems, especially micro-enterprises and SMEs in the manufacturing and agriculture sectors.
Bank financing is still the primary source of funds for Malaysian SMEs. About 52% of Malaysian SMEs depend on bank financing for their working capital needs. However, it’s not always easy for SMEs to get approval for bank financing, especially for products that require collateral. The dawn of Malaysian FinTech and debt investment financing platforms may help more local SMEs attain working capital.
In fact, debt investment financing products are suitable for SMEs as they often require no collateral. With this type of financing, a prospective SME can apply for financing online – thereby application can be done anytime, anywhere so long as there is access to the Internet. The application process is less time-consuming and more streamlined, with quicker disbursement time.
To conclude, Malaysian SMEs are growing bigger and better annually. However, to grow well, they need more sources of financing to manage working capital and cash flow.