There is a future in fintech for SMEs

MALAYSIA has over one million SMEs (small and medium enterprises) making up 98% of total businesses. The majority are micro SMEs, of which 21% are owned by women.

SMEs face challenges like lack of business connections, access to funding and education, and limited awareness of digital tools as well as a lack of Internet presence in a world that’s going fully digital.

Of all these businesses, only one-third of them actually have employees. Micro SMEs are mostly self-employed individuals operating a very small unincorporated business, which may or may not be the owner’s principal source of income.

SMEs 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, and productivity performance varies across firms.

The persistent gap between SMEs and large firms affects growth potential and income distribution. Effective measures enabling SMEs to scale up and innovate can have a considerable economic and social impact, empowering them to participate in the global economy, innovate and grow.

One industry in which Malaysian SMEs could become a world pioneer 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 shariah-compliant financial services.

Islamic finance is now entren-ched in Malaysia, accounting for 32% of financing to customers. Yet, according to the IMF, Islamic fintech is still in its infancy here, with just a handful of startups and SMEs and a much less developed sector in comparison with countries such as Indonesia.

In Malaysia, the growth of Islamic fintech can impact development in rural areas among Malays, offering this community a unique financial-inclusion opportunity to catch up and increase contribution to our national development.


Chairman, Malaysia

Digital Economy

Corporation (MDEC)

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