I. The emerging digital banking landscape

In 2014, the first concept of a digital bank emerged in Asia’s banking industry landscape, when the Chinese government awarded licenses to Ant Group’s MyBank and Tencent’s WeBank[1]. Within the next decade, growth and adoption of digital banks spread across both developed and developing economies in the broader Asia Pacific region, beginning with two of Asia’s highly developed financial systems, Hong Kong and Singapore, followed by other countries like South Korea, Japan, Indonesia, the Philippines.

Malaysia too has begun its own journey towards digital banking adoption in recent years. In April 2022, BNM issued digital banking licenses to five qualified recipients[2] comprising different groups of companies or consortia, of which three were awarded conventional licenses and the remaining two Islamic licenses. At the time of writing, three of these consortia have already begun commercial operations, while two more licensees are due to launch their respective banks by the end of this year, in alignment with the approved commencement date set by the ministry of finance for end 2024[3].

II. Pursuing the financial inclusion agenda

As part of its licensing requirements, BNM has given its digital bank license holders a clear mandate to meaningfully address financial inclusion gaps and provide digital banking services for underserved and unserved segments that face limited or no access to traditional banking financing[4]. In fact, commitment to financial inclusion was a key cornerstone criteria used by the Central Bank to assess the best interest of applicants in its licensing framework, besides other factors such as character and integrity, nature and sufficiency of financial resources, and the soundness and feasibility of business and technology plans[5].

The requirement for these digital banks to focus on financial inclusion and address gaps in underserved and unserved segments underscores the Central Bank’s larger aspirations to create an inclusive financial system, as well as to address financial barriers faced by the unbanked to ensure that financial services are accessible and available to all segments of society.

III. What can digital banks offer?

According to BNM’s Financial Capability and Inclusion Demand Side Survey 2021-2022, Malaysians are fast adopting digitalized financial products and services, based on mobile banking, internet banking, payment card and mobile payments usage[6]. Moreover, the 2021 Global Findex report from the World Bank showed that 79% of Malaysian adults use digital payments, and this increased use was accompanied by a rise in utilization of other financial services, including savings and lendings[7].

The high take-up rate of digitalized financial services reflects a wider pattern of transformation in the banking industry, driven by innovative business models and the widespread adoption of advanced technologies to create financial access points through digital experiences. In line with this, digital banks have great potential to

provide better accessibility to financial services for those with limited access to conventional banking facilities.

As digital banks operate through digital apps and platforms, they remove traditional barriers to obtaining services, particularly for populations in remote or rural areas that may face difficulties travelling to a physical branch to access banking services. Moreover, by offering services in-app, digital banks have the potential to transform certain face-to-face banking processes, such onboarding, transactions, financing and others, to become more streamlined and simplified.

Some digital banks have also ventured into “embedded finance” (a term for integrating banking services with nonfinancial apps and services) which serves to enable application procedures to be done in a shorter, more efficient processes. By refining the user onboarding experience and simplifying the end-to-end journey for users, digital banks can thus promote better financial inclusivity, by making banking less of a hassle and more accessible for customers that may be less financially literate.

On the same note, digital banks can also harness data analytics to identify customers’ specific pain points and tailor products that can meet their needs. Often, underserved communities do not require elaborate services early in their financial journey. For example, credit-poor groups may benefit more from “bite-sized” affordable financing products, such as micro-savings, micro-financing, and micro-insurance. Such ‘simplified’ products can help to provide greater financial inclusion to underserved communities, small businesses and consumers alike.

IV. Balancing financial inclusion commitments with ensuring profitability

In meeting BNM’s mandate of serving the financially underserved, one of the primary challenges faced by digital banks is the question of whether they will be able to meaningfully do so, while staying on track to achieve sustainable growth and profitability in the long-term.

For context, BNM has imposed an asset growth cap of RM 3 billion for digital banks to prove their viability during the foundational phase, before graduating to become a full-fledged bank[8]. However, even with this relatively modest threshold, digital banks may face significant challenges in scaling growth, especially when it comes to managing risks and balancing their assets and liabilities to provide services to underserved communities.

Compared to established financial institutions that already have mature ecosystems and established expertise across core business areas, digital banks are still in the nascent stages of evolution and finding their footing in the industry. As a start, they will need a sound business plan that includes strategies to remain sustainable, while also delivering on the agenda of financial inclusion.

V. Collaborate with like-minded Fintech partners to spur financial inclusion

One strategy that digital banks can consider adopting is to work with FinTech companies that can offer relevant support to meet the financial needs of the underserved and unserved segments, which is a key criteria established by BNM. While the current digital banking landscape in Malaysia predominantly offers deposits and payments as service offerings, the next step to widening financial inclusion would be to expand into providing loans to underserved communities, since accessibility to such credit facilities is a common pain point.

As the digital arm of Credit Guarantee Corporation Malaysia Berhad (CGC), CGC Digital aims to empower MSMEs by creating a simpler and more seamless financing experience in the digital ecosystem, and help to close the funding gap for these enterprises[9]. To date, it has over three years of accumulated experience in partnering with players in the digital finance ecosystem, combining expertise and co-creating accessible digital banking solutions for the underserved and unserved segments.

One such solution involves innovating CGC’s digital guarantee product to help bridge the gap for MSMEs in accessing credit facilities, and championing the alternative credit scoring approach to complement traditional credit assessments. This is done through harnessing digital technology such as AI and machine learning tools to gather information on spending habits and financial behaviour patterns of loan applicants that may lack formal credit history[10]. The “alternative credit scoring” approach, or ACS, integrates these alternative data points into credit assessments, and has been shown to be useful in expanding access for “thin-file” applicants, as it helps to form a more complete picture of their risk profiles.

Since its inception, CGC Digital has built up a strong track record of collaborating with like-minded partners in the FinTech ecosystem to enhance financing access for MSMEs and tackle the challenges in their growth journey. A key focus of CGC Digital is the development of innovative digital guarantee products through a digital-first approach. These digital guarantee products are designed to broaden the scope of services available, specifically targeting underserved and unserved markets, thereby fostering greater financial inclusion.

CGC Digital’s commitment to bridging the financial inclusion gap for MSMEs largely mirrors the mandate of digital banks to reach more underserved segments and provide them with access to financial services. This shared vision underscores the potential of both players aligning to become partners, and supporting each other to make a broader, wide-ranging impact in financial inclusion. By joining forces with CGC Digital through strategic partnerships and collaborations, digital banks may well unlock new opportunities to co-create value and enhance their effort to expand financing access for underserved segments, driving greater inclusion within Malaysia’s digital finance ecosystem in the long term.

Commenting on the company’s potential of collaboration with digital banks, Puan Yushida Husin, CEO of CGC Digital, said, “As a digital first tech startup, we share similar digital DNA with digital banks, and are committed to partnering with MSMEs throughout their life stages to drive their excellence through digital guarantees and other targeted forms of developmental support to scale their impact. We believe that we can bring a strong value proposition to the table for digital banks, as the digital banking business aligns with our own aspirations to promote financial inclusivity for MSMEs in support of their growth and development.”

In this regard, digital banks that leverage on CGC Digital’s expertise may stand to benefit from reducing their exposure to excessive risk while taking on “thin-file” MSMEs that are generally deemed to be riskier clients.

VI. BNM endorses stakeholder partnerships, in line with strategic policy thrust to advance financial inclusion

In its second Financial Inclusion Framework (FIF) 2023-2026, BNM emphasised the importance of strategic collaborations and partnerships between financial service industry players to drive financial inclusion.

The FIF, which serves as a four-year roadmap to advance financial inclusion, sets out wide-ranging strategies aimed at achieving broad development outcomes and elevating financial resilience and well-being for all Malaysian residents. Significantly, under Policy Objective 5 of the FIF, the Bank has underscored the importance of strengthening the role and capabilities of financial institutions in promoting financial inclusion. Among the strategies laid out to achieve this include facilitating “greater partnerships, collaborations and capacity building” among stakeholders in the financial services industry, as well as ensuring a conducive policy environment “for digital banks to evolve business models to effectively deliver on financial inclusion commitments.”[11]

Complementing this, in addressing the Malaysian SME National Conference 2024, BNM Deputy Governor Jessica Chew stressed that the path forward to deliver an effective financing strategy for SMEs would need to include, among others, a focus on developing and deepening alternative sources of financing. She further stated that the entry of digital banks and alternative fundraising platforms offering “different business models and innovative approaches to credit assessments” would contribute to the expansion and diversification of funding sources” for SMEs[12].

These sentiments indicate that the Central Bank recognizes the role of digital banks as a significant driver of financial inclusion and encourages strategic partnerships with industry stakeholders that can offer innovative solutions in expanding access for the unserved and underserved segments. In this regard, collaborating with a digital-first, forward-looking FinTech such as CGC Digital, with its innovative product offerings and strong commitment to empower financially unserved and underserved MSMEs, presents promising opportunities for digital banks.

At the end of the day, tapping into innovative partners and proven solutions can be a game changer for digital banks. Such collaborations enhance their capabilities to expand banking services to the underserved and unserved segments, while also aligning with the goal to become sustainable and thrive in the long run.

References:

1.  Frances Gagua, “Did Digital Banks Fail to Disrupt?,” Asian Business Review, March 28, 2023, https://asianbusinessreview.com/banking-technology/exclusive/did-digital-banks-fail-disrupt.
2. The five consortiums were Boost Holdings Sdn Bhd and RHB Bank Bhd; GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd; Sea Limited and YTL Digital Capital Sdn Bhd; AEON Financial Service Co, Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc; and KAF Investment Bank Sdn Bhd.
3. GXBank was the first to launch in the market in the final quarter of 2023, by a consortium made up of Grab-linked GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd. Following this, two other digital banks opened its doors to the public in June: AEON Bank, a subsidiary of AEON Financial Service Co, Ltd; and Boost Bank, a joint venture between Boost Holdings Sdn Bhd and RHB Bank Bhd. The remaining two digital banking applicants that have yet to launch their digital banks are a consortium led by Sea Limited and YTL Digital Capital Sdn Bhd and a consortium led by KAF Investment Bank Sdn Bhd.
4. BNM, “Financial Inclusion Framework 2023-2026 Strategy Paper,” June 23, 2023, https://www.bnm.gov.my/documents/20124/55792/SP-2nd-fin-incl-framework.pdf.
5. “Five Successful Applicants for the Digital Bank Licences – Bank Negara Malaysia,” accessed June 27, 2024, https://www.bnm.gov.my/-/digital-bank-5-licences.
6. “Financial Stability Review First Half 2022,” 2022.
7. “The Global Findex Database 2021,” Text/HTML, World Bank, accessed November 1, 2024, https://www.worldbank.org/en/publication/globalfindex.
8. BNM, “Licensing Framework for Digital Banks,” December 31, 2020, https://www.bnm.gov.my/documents/20124/938039/20201231_Licensing%20Framework%20for%20Digital%20Banks.pdf.
9. “CGC Digital: Making Finance Inclusive and Accessible for MSMEs,” CGC Digital, accessed November 21, 2023, .
10. With their data driven approach, digital banks can assess financial transactions using non-traditional data sources such as payments, payroll and point of sale terminals on digital platforms. Data obtained from these digital transactions (sometimes called ‘digital footprints’) can be applied to alternative credit scoring frameworks to complement traditional credit scores, and create a more holistic picture of creditworthiness.
11. Bank Negara Malaysia, “Financial Inclusion Framework 2023-2026,” June 23, 2023, https://www.bnm.gov.my/documents/20124/55792/SP-2nd-fin-incl-framework.pdf.
12. “Deputy Governor’s Keynote Address at the Malaysian SME National Conference – Bank Negara Malaysia,” accessed June 27, 2024, https://www.bnm.gov.my/-/dgjc-spch-smenc24.

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The importance of credit in lending

Compared to larger enterprises, MSMEs typically face an uphill battle obtaining loans from financial institutions, due to stringent credit requirements needed to prove their creditworthiness. Poor documentation of financial records, lack of collateral and inconsistent cash flow are some common reasons why smaller and medium-sized enterprises tend to face barriers in accessing financial support from banks.

While these challenges are not new, in the current troubled economic climate, MSMEs are likely to face an even greater struggle in making ends meet while also expanding their working capital. During these times, it is crucial that smaller enterprises have access to financing support in order to maintain a steady growth momentum and grow their business, so that they are able to compete to their fullest potential in the market.  

How credit guarantee schemes help MSMEs

Credit guarantee schemes (CGS) are a popular tool used by governments to help MSMEs overcome barriers to accessing credit in the conventional banking system. Such schemes reduce banking risks in the distribution of credit to MSMEs, by guaranteeing a share of the default risk of bank loans to MSMEs. 

In essence, CGS involve the partial transfer of credit risk stemming from a loan or a portfolio of loans to a third-party guarantor, thus cushioning lenders’ exposure to credit loss. In the case of non-performing bank loans, the bank recovers the value of the guarantee, which is usually provided against a fee covered either by the borrower (MSME), the lender (bank) or both. CGS can encourage financial institutions and other creditors to offer loans to MSMEs, not only during normal economic conditions, but also during periods of financial crisis and downturns[1][2].

At the height of the COVID-19 pandemic in 2020, data from the World Bank showed that as many as 41 countries had launched 57 credit guarantee schemes as stimulus measures to catalyse credit extension to financially distressed MSMEs, and assist them in recovery from the fallout[3]. In many developed and developing economies, public or state-owned CGS are a commonly applied financial instrument to help bridge the MSME financing gap. These include Asian countries such as Bangladesh, China, India, Indonesia, Philippines, Sri Lanka, Taiwan and Malaysia[4].

In Malaysia, the Credit Guarantee Corporation (CGC) acts as the leading provider of credit guarantee products and services for SMEs, especially those who have not yet built up a robust credit history, to gain access to credit[5].

What is digital credit guarantee and why is it the way forward?

Ever since the pandemic accelerated greater adoption of digital technologies, technology has played a significant game changer role in many advanced economies. Malaysia is no exception to this trend of adoption. During the crisis, when the entire country was forced into a series of lockdowns, many households and businesses turned to innovative products and solutions to facilitate online economic activities, and embraced seamless data sharing and e-commerce on digital platforms and ecosystems.

Today, technology continues to transform and drive growth in our economy, even in industries and sectors that had historically been less digitalised. As outlined in the Digital Economy Blueprint, the government aims to eventually embrace a fully digital economy, where economic and social activities are driven by technological infrastructures and web-based or technology-oriented companies.

In line with the strong push for whole-of-economy digital transformation, Malaysia’s digital economy is projected to take a 25.5 per cent share of the country’s GDP by 2025, according to government statistics[6].  Likewise, an emerging transformative effect is reshaping the landscape of Malaysian financial services. In its Financial Sector Blueprint 2022-2026[7], Bank Negara Malaysia highlighted its focus to support a more vibrant digital financial services landscape, and to promote a holistic digitisation of the sector.

The digitisation of credit guarantee forms an important part of this equation as it helps facilitate alignment with financiers and lenders migrating to digitalised services. Similar to traditional credit guarantee schemes, a digital credit guarantee shoulders credit risks for lenders.

While take-up is more evident among Fintech companies and digital lenders, certain banks have also recently begun to integrate digital credit guarantees into their suite of digital financing solutions, in response to a rise in appetite for digital tools and financing[8][9].

CGC Digital: From digitising to digitalisation of credit guarantee

As the wholly-owned digital arm of CGC, CGC Digital’s core mission is to create a seamless financing experience for MSMEs in the digital ecosystem[10], by utilising meaningful data and necessary tools and implementing efficient mechanisms. In line with advances in financial sector digitalisation, the start-up has invested into digitalisation efforts to develop its own digital credit guarantee assessment tool that can be used to assess MSMEs’ creditworthiness. In addition, it has reached out to various like-minded players and stakeholders to embark on proof-of-concept initiatives aimed at validating the viability of this tool, while shaping it to be more nuanced and effective.

To date, CGC Digital’s collaboration efforts have included Fintech companies such as Funding Societies, a unified SME digital finance platform, to jointly develop a digital credit guarantee product for Malaysian micro and small enterprises[11], and a recent tripartite partnership with Malaysia Digital Economy Corporation (MDEC) and payment system operator Payments Network Malaysia Sdn Bhd (PayNet) to further drive financial empowerment and foster inclusivity among MSMEs. The latter partnership involved CGC Digital driving its digital guarantee model, while using PayNet’s payment data for insights and to perform alternative credit scoring, and leveraging on MDEC to connect with financial players and champion policy and frameworks[12]. 

Aside from partnering with financiers in the digital lending space, CGC Digital has also collaborated with banks looking to expand their digital financing solutions, while facilitating greater inclusivity for MSMEs that would otherwise struggle to access traditional means of credit. Recently, the startup launched a Digital SME Startup Financing scheme in collaboration with Alliance Bank, to provide simplified access to working capital for young companies as young as six months in their earliest growth journey[13][14].

Digital credit guarantees provide a solution to widening financial inclusion

At the end of the day, the true value of the digital credit guarantee product lies not just in driving transformation within the financial services landscape, but in addressing the challenges of financing access for MSMEs that would otherwise struggle to access traditional means of credit.

By harnessing technologies such as artificial intelligence (AI), machine learning (ML), blockchain and big data analytics to evaluate transactional data such as utility and assessment payments, rental payments, mobile payments and other non-traditional data points for credit assessment, digital credit guarantees have the potential to spur greater inclusion and access to credit and financial services for the MSME segment.

By going back-to-back with banks and alternative financiers in the digital ecosystem, CGC Digital and other FinTech companies that are involved in developing digital credit guarantees play a pivotal role in widening access to finance for underserved and unserved MSMEs in the digital credit space, bridging the gap for such companies to be supported at each stage of their financing journey.

References:

1. Vienna Initiative Working Group on Credit Guarantee Schemes, “Credit Guarantee Schemes for SME Lending in Central, Eastern and South-Eastern Europe” (European Investment Bank, November 2014), https://www.eib.org/attachments/efs/viwg_credit_guarantee_schemes_report_en.pdf.

2. Vienna Initiative Working Group on Credit Guarantee Schemes.

3. World Bank, “Map of SME-Support Measures in Response to COVID-19,” accessed November 21, 2023, https://www.worldbank.org/en/data/interactive/2020/04/14/map-of-sme-support-measures-in-response-to-covid-19.

4. Ruth-Helen Samujh, Linda Twiname, and Jody Reutemann, “Credit Guarantee Schemes Supporting Small Enterprise Development: A Review,” 2012.

5. CGC Malaysia, “FAQ | Credit Guarantee Corporation – Powering Malaysian SMEs®,” accessed November 21, 2023, https://www.cgc.com.my/faq/.

6. The Edge Markets, “Catalysing Malaysia’s Digital Economy,” September 27, 2022, https://theedgemalaysia.com/article/catalysing-malaysias-digital-economy.

7. Bank Negara Malaysia, “Financial Sector Blueprint 2022-2026,” January 2022, https://www.bnm.gov.my/publications/fsb3.

8. “Axiata’s Digital Bank Consortium Inks Deal With Credit Guarantee Corp,” Fintech News Malaysia, June 28, 2021, https://fintechnews.my/27770/virtual-banking/axiatas-digital-bank-consortium-inks-deal-with-credit-guarantee-corp/.

9. “Boost Bank Receives Nod from BNM to Launch Its Digital Bank,” FinTech News Malaysia, January 8, 2024, https://fintechnews.my/41751/virtual-banking/boost-bank-rhb-bnm-approval/.

10. “CGC Digital: Making Finance Inclusive and Accessible for MSMEs,” CGC Digital, accessed November 21, 2023, http://imgig.com.my/.

11. TechNode Global Staff, “Funding Societies Partners CGC Digital to Support MSMEs via Digital Supply Chain Financing Guarantee – TNGlobal,” accessed November 21, 2023, https://technode.global/2023/08/03/funding-societies-partners-cgc-digital-to-support-msmes-via-digital-supply-chain-financing-guarantee/.

12. Bernama, “MDEC, CGC Digital, Paynet Tie Up To Address RM 90 Bln MSME Financing Gap,” December 18, 2023, https://www.bernama.com/en/business/news.php?id=2255362.

13. Alliance Bank, “MSMEs Continue to Depend on Banks for Financial Support in 2024 to Boost Growth Prospects,” March 21, 2024, https://www.alliancebank.com.my/About-Us/Media-Centre/MSMEs-Continue-to-Depend-on-Banks-for-Financial-Support-in-2024-to-Boost-Growth-Prospects#:~:text=To%20further%20grow%20and%20expand,boost%20productivity%20for%20further%20growth.

14. Berita Harian, “Alliance Bank, CGC Digital Bantu Syarikat Baharu Dapat Modal,” January 23, 2024, Berita Harian Online edition, https://www.bharian.com.my/bisnes/korporat/2024/01/1203621/alliance-bank-cgc-digital-bantu-syarikat-baharu-dapat-modal.

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Lack of a one-stop financing marketplace for MSMES in the digital ecosystem

Being a small business in today’s fast-paced digital world is a big challenge. Especially in the wake of the global pandemic, many small businesses, or MSMEs, have been left grappling with the challenges of pivoting from analogue to digital, and growing their business in an online world. A majority of business owners today inhabit a “digital ecosystem”, defined as a network of interconnected digital technologies, platform and services that interact with each other to create value for businesses and consumers[1].

Current rapid technological advancements in the financial services industry have led to the emergence of digital financial services (DFS)[2] and growth of various marketplaces and platforms offering various integrated solutions for different market segments. However, despite these rapid advances, it appears that there is still a lack of a viable one-stop digital solution that holistically addresses the unique financing needs and issues faced by MSMEs.

MSMEs face challenges accessing financing via traditional banking systems

The crucial role of MSMEs in driving Malaysia’s economic growth cannot be understated, considering that they make up 97.4% of business establishments and contribute 38.4% to the country’s total GDP[3]. In total, approximately 1.12 million business establishments in Malaysia are defined as MSMEs[3] and they employ 48.2% of the country’s population[4]. 

One of the most critical components for MSMEs to successfully scale their growth is good access to finance and lines of credit. Access to finance promotes good cash flow and financial flexibility, which in turn allows MSMEs to embrace new opportunities when they arise, while sustaining their current operations.

However, insufficient cash flow and working capital are common barriers to MSMEs’ growth aspirations. For many small businesses, opening a business banking account or applying for a loan can prove challenging due to having insufficient credit history and a lack of collateral. Moreover, MSMEs still face difficulties navigating complex financial regulations in the traditional banking system. Brought together, these hurdles negatively impact the financial health of MSMEs and thus, their potential for high growth and business expansion.

Benefits of digital platforms and ecosystems for MSME financing

With their growing significance in driving economic expansion, it is important to empower MSMEs with better access to financing and provide assistance to accelerate their business.

In this digital age, digital ecosystems or platforms can be a key catalyst to MSMEs’ growth and competitiveness, by providing them with easy, convenient access to diverse financing options and solutions that are tailored to their unique financing needs.

As an alternative to physical financing environments, digital platforms have several characteristics which make it faster and easier for MSMEs to get their needs met. At the start of development, many platform creators will choose to prioritise value creation for their target market. In other words, when creating the ecosystem, the focus is usually put solely on the customer and understanding their challenges and needs[1]. This allows for a more tailored approach to designing a system that is solutions-based and capable of addressing very specific problems or issues.

The second advantage of a digital platform is that they are largely data driven and have the ability to amass a wealth of information about processes and transactions that take place on the platform, to generate insights and make strategic decisions[1]. Data analytics is one of the most important factors for any digital ecosystem and assists tremendously in optimising platform efficiency.

Thirdly, digital platforms can also harness the power of automation technologies to make data-driven insights actionable and dynamic. In the context of digital financial services, machine learning algorithms may be used to streamline existing business processes, enhance productivity and empower collaboration through seamless knowledge transfer. Collectively, this serves to accelerate the high impact potential of the digital platform and enable it to provide greater value for its user base.

How CGC Digital is innovating a one-stop digital marketplace to spur financing access and targeted assistance for MSMEs

In 2018, Credit Guarantee Corporation (CGC) had developed and launched imSME, a financing and loan referral platform that was the first of its kind in Malaysia[5].

Back then, the main function of the platform was to aggregate financing information from financial institutions, agencies and alternative financiers[6]. Besides this, imSME also served to matchmake MSME users with compatible financing products and facilities and assist with applying for loan/financing from a single platform[5]. In short, imSME was designed to be a digital tool that could provide MSMEs easy and convenient access to information resources and financial services.

As a data and fintech subsidiary of CGC, CGC Digital is now pushing to further optimise the imSME platform into a fully integrated digital marketplace. With its strong commitment to advancing financial sector digitalisation via an MSME-centric approach, the fintech company aims to innovate the platform to become an embedded finance ecosystem[6] that can support MSMEs’ needs at each stage of their growth journey.

While the core services of providing information and financing assistance will remain, the optimised imSME ecosystem will also incorporate new expanded features, such as digital credit guarantee and other digital credit supplementation products and services[6], to make access to financing simpler and even more seamless for MSMEs. These features are ultimately aligned with the goal of transforming imSME into a comprehensive, one-stop digital financing marketplace for smaller entrepreneurs and business owners. 

Besides this, CGC Digital believes that partnerships with key players are essential to enable the imSME platform to offer higher value-added services to MSMEs. Thus, it will seek to identify and collaborate with relevant partners that can synergise with the platform’s ecosystem and contribute to co-creating value in different areas.

Through these efforts, CGC Digital’s ultimate vision for the imSME platform is to be a one-stop digital marketplace to pave the way for underserved MSMEs to have convenient access to financial services and support to accelerate their business.

Alignment with NIMP 2030

As a digital initiative that aspires help bridge the gap faced by MSMEs in accessing financing and drive greater financial inclusion, the imSME platform is highly relevant to the Madani government’s recently launched New Industrial Master Plan (NIMP) 2030.

The NIMP 2030 is a policy framework that lays out key goals and missions, as well as specific strategies and focuses aimed at driving Malaysia’s industrial development over the next seven years. Under the NIMP, CGC has been tasked to expand the imSME platform to show all available funding options, including government funding and those from the capital market, as part of a wider goal to mobilise a comprehensive financing ecosystem for SMEs[6].

CGC Digital not only embodies those goals, but is striving to take it a step further, by innovating imSME’s core product into a comprehensive digital financial services marketplace. By engaging with different partners to bring an array of financing products and digital services to the platform, it aspires to provide greater value to MSMEs through a targeted range of solutions tailored to meet MSMEs’ needs. Being a financial technology solutions provider, one of its goals is also to leverage AI and machine learning technologies to create a better customer experience for business owners, and enable a seamless, frictionless journey while on the platform.

With the imSME digital marketplace as its first milestone platform, CGC Digital is committed to continue spearheading digital innovation and to be a leading fintech solutions provider in the digital financial services ecosystem. It will continue to proactively innovate digital solutions to serve MSMEs better and grow alongside them to help them succeed.

References:

1. Talin, Benjamin. “What Is a Digital Ecosystem? – Understanding the Most Profitable Business Model,” December 9, 2020. https://morethandigital.info/en/what-is-a-digital-ecosystem-understanding-the-most-profitable-business-model/.
2. World Bank. “The Role of Digital Financial Services in Bridging the SME Financing Gap,” July 13, 2023. https://blogs.worldbank.org/psd/role-digital-financial-services-bridging-sme-financing-gap.
3. SME Corp. Malaysia. “Profile and Performance of MSMEs in 2022.” Accessed September 18, 2023. https://www.smecorp.gov.my/index.php/en/micro-enterprises
4. The Star Online. “Malaysia’s MSME GDP Surges 11.6% in 2022 to RM580.4bil -DOSM.” The Star. Accessed December 6, 2023. https://www.thestar.com.my/business/business-news/2023/07/27/malaysia039s-msme-gdp-surges-116-in-2022-to-rm5804bil–dosm.
5. CGC Malaysia. “About imSME.” imSME. Accessed December 6, 2023. https://imsme.com.my/portal/about-imsme/.
6. “New Industrial Master Plan (NIMP) 2030,” 2023. https://www.nimp2030.gov.my/nimp2030/modules_resources/bookshelf/NIMP_20303/index.html.

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