SC chairman Datuk Seri Dr Awang Adek Hussin.
KUALA LUMPUR: The Securities Commission (SC) has launched an ambitious plan to ensure small companies in Malaysia get a bigger portion of fundraising activities in Malaysia.
The five-year plan has a goal for fundraising to reach RM40bil by 2028 for micro, small and medium enterprises (MSMEs) and mid-tier companies (MTC). MTCs are classified as those with revenues from RM20mil to RM500mil.
In 2023, these companies only raised RM6.3bil from the capital market, made up of sources ranging from the ACE and LEAP Markets, private equity (PE) and venture capital (VC) as well as equity crowdfunding and peer-to-peer lending platforms.
SC chairman Datuk Seri Dr Awang Adek Hussin said the utilisation of capital market financing among MSME and MTC is relatively low.
“Some MSMEs are unaware of capital market solutions and some may feel that raising capital in this way is too expensive and that the compliance process is overly difficult.
“From the investors’ perspective, there are difficulties in assessing the risk of MSME investments due to a lack of necessary information. In addition, the investments could be relatively illiquid due to the long investment horizons.
“The roadmap has come up with some initiatives specifically developed to address these challenges,” he said during the launch of the “Catalysing MSME and MTC Access to the Capital Market: Five-Year Roadmap (2024-2028)”.
He said efforts being done include the provision of guarantee facilities for MSMEs in their fund raising as well as making it easier for these firms to list on Bursa Malaysia.
“The approval process for ACE Market of Bursa Malaysia has already been reduced from six months to three months,” he said.
Second Finance Minister Datuk Seri Amir Hamzah Azizan said the LEAP Market needs to be revitalised by widening the pool of listing advisers and to allow alternative remuneration methods for these advisers, such as payment in shares.
The SC said the roadmap will complement and support existing national development policies including the Madani economy framework, the 12th Malaysia Plan and the New Industrial Masterplan 2030.
“The roadmap employs a whole-of-nation approach with extensive industry engagements, workshops, studies and benchmarking,” Awang Adek said.
Ng Sai Kit of the Malaysia Venture Capital and Private Equity Association said while the RM40bil target is almost seven times what was achieved in 2023, it is not that big when compared with global capital markets.
He is confident that it is achievable in light of the recent boost to the local VC and PE scene under programmes such as the Malaysia Venture Capital Roadmap and KL20 Action Paper.
Funding Societies Malaysia country head Chai Kien Poon said the roadmap aims to address other issues faced by MSMEs and MTCs by emphasising collaboration between the stakeholders.
“All stakeholders across the value chain need to work together to create awareness on fundraising via the capital market. They also need to nurture MSMEs’ financial knowledge, provide market access, de-risk capital market products to crowd in private investors,” he told StarBiz.
Meanwhile, Small and Medium Enterprises Association chairman Datuk William Ng said although the country’s financing ecosystem is quite sophisticated, many gaps remain. Among them are the speed of application, approval and disbursement, and the risk appetite.
He said illiquidity and poor valuation remain as major stumbling blocks for most of the SMEs that are listed on the LEAP Market.
“This is stopping otherwise highly productive companies from getting listed, while those that are listed are stuck with illiquid stocks and low valuations. This is why many SMEs choose the trade sale route, as it is far cheaper and often commands better valuation than getting listed.”
To become more eligible and attractive to potential funding, Chai said MSMEs need to be equipped with the proper financial and business planning knowledge, leveraging on services provided by agencies such as SME Corp and Credit Guarantee Corp Malaysia.
“This is to ensure that they can manage their cash flow well (which was also addressed in the roadmap) and access funding to drive innovation and become internationally competitive,” he said.
