Misunderstanding of SME Digital Financing in Malaysia by Sam Wong

Sam Wong, Business Development Manager at Funding Societies

Hi I am Sam Wong, a Business Development Manager from Funding Societies Malaysia.

Prior to joining Funding Societies, I have been in banking for more than 8 years serving SME, Commercial and Corporate Lending. My day-to-day job pretty much involved in credit paper writing, risk management, financial analysis, and client relationship management etc. Working in the bank made it easier to convince clients, as the brand is well-recognized, and most banks have existed for more than half a century in Malaysia. In the past, I had jumped to newer banks, some with only 10 years of establishment in town, and were still able to perform.

But it was never as hard as being in a ‘mini SME digital financing provider’ that was 2 years old at that time, simply due to market/customers’ perception. Therefore I would like to share more about this ‘mini SME digital financing provider’ that I am working with, how we are different from traditional banks, and how we aim to help the community as our brand purpose – Stronger SMEs, Stronger Societies. 

I still remember my first day at work as I entered my new office, it’s a pretty simple office with less than 10 colleagues at that time, including my CEO, Kah Meng (since then we have grown to a team of 35, and more to come).

In hindsight, it was a pretty small team at that time. I would be lying if I say this question didn’t cross my mind:-  “Is this a legit digital financing platform registered with Securities Commission of Malaysia?’ (Can’t help but to imagine what was Kah Meng thinking when he decided to join Funding Societies Malaysia :P)

But this is how start-up companies are like in Malaysia (will leave this to another post other time). In my past working experience with the banks, I was welcomed by numerous new colleagues in an organization that has 3000-5000 workers at any point in time. So it was definitely a culture shock for me.

Nonetheless, I had set appointment on my first day of work, so no time wasted, I went on to meet my first customer. It helped me to regain my confidence as we were able to help customers to go through their ‘difficult cashflow period’. The first SME customer whom I met was a traditional old-time bank customer with close to one hundred million sales turnover (in Ringgit), who knew me during my banking days. The banks which used to serve his business had turned them down after they confirmed an order for a project they committed. Caught with no other options and almost giving up on the project that could help their company to increase their business volume (they really think so at that time), he approached me and I explained to him how we could help them as a peer-to-peer financing platform.

As I mentioned earlier, as a traditional bank customer, they were used to this sweet interest rate and tenor offered by banks. And therefore, when they hear of SME financing interest rate and tenor, most customers will have second thoughts. There were many doubts and misconceptions about us such as:-

Are we licensed money-lenders – in other words (ah long)?

We are not a money-lender to begin with. We are a registered debt financing market operator under the Securities Commission. It allows us to get investments from the market to then finance SMEs on their working capital requirement and also better cash flow planning. (For the list of market operators please refer to https://www.sc.com.my/digital/list_rmo/)

What does a digital financing/investment operator do?

As a digital financing platform, we answer to both SMEs and investors. On SMEs, we verify and underwrite the financing just like banks do, to ensure that it is the most risk suitable investment available for our investors. At the same time, we also screen through our investors properly to align with securities commission regulation. Understand more about digital financing/lending.

Is digital financing business model legit or is it similar to money game?

It’s a new concept in Malaysia although this model exists in the US and China since 2010 and 2012 respectively. However, we are definitely not money game or any other illegal business as we are well-regulated by Securities Commission Malaysia.

Nonetheless, this SME owner eventually applied with us and managed to obtain the funds within two weeks time, which exceeded his expectation. He thanked me the best way that anyone could have, by introducing his friends and customers to me.

We consider him as our influencer now. We used to joke that he was not only signing a financing agreement, but he was also signing as our Funding Societies Ambassador.

To be fair, it’s normal to doubt, but always ‘Doveryai Nor Proveryai’ (Trust But Verify). There is a reason why Securities Commission Malaysia registered Funding Societies Malaysia and other digital financing platforms as market operators. We are here to bridge the financing gap, especially for SME owners.

Traditionally, the banks have never served SMEs or businesses that are incorporated between 1 to 3 years. This is because there is no proven track records, and therefore they are not served or underserved by the banks.

Many of them are in fact first-time borrowers with no collateral or credit guarantee to offer. But does it mean that these businesses have no potential to grow? (it doesn’t seem so). With the help of Funding Societies, we are even serving the matured SME that is underserved by the banks (as mentioned in the earlier case study).

As I mentioned earlier, when I first joined the company with less than 10 colleagues, we were slightly below RM5,000,000 on total fund and disbursed amount. Today (our one-year mark), we have backed and disbursed for more than 100 SMEs in the market, growing more than 15 times in Malaysia alone. (Malaysia’s contribution to group has increased 400%, and on a group level, Funding Societies has disbursed more than RM670 million regionally across Malaysia, Singapore and Indonesia).

Are we satisfied? Well, the answer is no. With the financing gap in Malaysia for SMEs being in tens of billions, we need to work harder with other digital financing operators in the market to bridge the gap and hopefully reach out and help more SMEs.

As a digital financing platform operator, we will ensure that we are compliant with regulations and at the same time drive business by making sure it’s a WIN-WIN situation for both our investors and borrowers, keeping in mind our brand purpose – Stronger SMEs, Stronger Societies. 

If you have any other questions, feel free to post them on the comment section or write to me at Sam@fundingsocieties.com. I will be happy to assist on both borrowers and investors queries.


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