Through this partnership, SMEs can now apply for financing via Capsphere’s platform and benefit from credit risk-sharing support arrangement through CGC Digital. The offering includes Accounts Receivable (AR) and Accounts Payable (AP) financing. AR financing allows SMEs to access early payment on invoices, while AP financing supports timely supplier payments in enhancing cash flow, operational continuity, and supplier relationships.

“The launch of Capsphere’s AP and AR financing backed by CGC Digital Guarantee represents a key milestone in our mission to unlock fair and secure access to capital for SMEs,” said Yoon Jun Jie, CEO of Capsphere. “With CGC Digital’s support, we are raising the bar for trust and impact in Malaysia’s P2P financing space.”

This initiative reflects CGC Digital’s commitment to enabling inclusive, tech-driven financing for underserved and growing MSMEs. It also helps foster a more robust digital financing ecosystem through strategic de-risking partnerships.

“This collaboration with Capsphere is a strong addition to our expanding fintech ecosystem,” said Yushida Husin, CEO of CGC Digital. “We’re proud to support emerging digital platforms in broadening financing access while sharing risk to promote SME resilience.”

Key Features of the Capsphere and CGC Digital Initiative:

• Credit guarantees on a risk-sharing basis for eligible SME transactions
• Enhanced financing access for underserved and growth-stage businesses
• Seamless integration into Capsphere’s asset-based financing model.

The product is now live, with the first SME financing note currently open on the Capsphere platform. SMEs across Malaysia can apply online and benefit from CGC Digital’s credit risk-sharing support in helping reduce barriers to funding while safeguarding commercial discipline.

For more information, please visit

www.cgcdigital.com.my | www.imsme.com.my | www.b2bfinpal.com

About CGC Digital

CGC Digital is a FinTech company, established as the digital arm of Credit Guarantee Corporation Malaysia Berhad. Registered in July 2022, its primary goal is to empower Micro, Small, and Medium Enterprises (MSMEs) by creating a simpler and more seamless financing experience in the digital ecosystem.

For more information about CGC Digital, please visit www.cgcdigital.com.my.

About Capsphere
Capsphere is Malaysia’s first peer-to-peer (P2P) financing platform focused on asset-based funding. As a licensed Registered Market Operator (RMO) by the Securities Commission Malaysia, Capsphere connects SMEs and investors through innovative and secured financing structures.

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This collaboration introduces a bespoke credit guarantee scheme by CGC Digital to support B2B Finpal’s Purchase Financing product—an innovative, short-term financing solution designed to help MSMEs meet capital needs during procurement cycles. The initiative addresses long-standing financing gaps by combining digital innovation with tailored risk-sharing mechanisms.

Key features of the Purchase Financing programme include:

• Financing of up to RM300,000 – Empowering MSMEs to fulfil larger purchase orders.
• Short-term tenure of up to 120 days – Supporting efficient procurement and fulfilment without immediate financial strain.
• Fast approvals within five days – Ensuring quick access to funds when MSMEs need it most.

The partnership marks the first phase of a broader, scalable programme, with both parties committed to co-developing more financing products to further strengthen MSME financial inclusion across Malaysia.

In addition, the Purchase Financing product will be made available on imSME, Malaysia’s first online financing referral platform for MSMEs, operated by CGC Digital. This integration is set to increase visibility and accessibility, helping more businesses identify and secure suitable financing solutions.

“This partnership reflects our commitment to accelerating MSME growth by collaborating with alternative finance providers,” said Yushida Husin, CEO of CGC Digital. “At CGC Digital, we champion open and inclusive partnerships that go beyond platforms. By embracing innovation and collaboration, we are building a more inclusive financing ecosystem that meets the evolving needs of Malaysian MSMEs.”

Through this strategic alliance, CGC Digital and B2B Finpal are poised to make a meaningful impact on the country’s MSME financing landscape.

For more information, please visit

www.cgcdigital.com.my | www.imsme.com.my | www.b2bfinpal.com

About CGC Digital

CGC Digital is a FinTech company, established as the digital arm of Credit Guarantee Corporation Malaysia Berhad. Registered in July 2022, its primary goal is to empower Micro, Small, and Medium Enterprises (MSMEs) by creating a simpler and more seamless financing experience in the digital ecosystem.

For more information about CGC Digital, please visit www.cgcdigital.com.my.

About B2B Finpal

B2B Finpal is an approved peer-to-peer (P2P) financing platform registered with the Securities Commission Malaysia. Focused on serving the needs of Malaysian businesses, B2B Finpal connects creditworthy MSMEs with investors, offering fast, flexible, and transparent financing solutions to support business growth.

For more information about B2B Finpal, please visit www.b2bfinpal.com.

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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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KUALA LUMPUR, 20 MARCH 2025 – Boost Bank, the nation’s first homegrown digital bank has partnered with CGC Digital, a fintech subsidiary of Credit Guarantee Corporation Malaysia Berhad (“CGC”) to enhance support for eligible underserved Micro, Small, and Medium Enterprises (MSMEs) across Malaysia. Under this partnership, a total of RM130 million has been earmarked for Boost Bank’s financing solutions – Term Loan facility and Revolving Credit facility. 

CGC Digital will provide CGC’s guarantee cover through bundling with Boost Bank’s MSME financing solutions to further strengthen MSME access to finance. This offering aims to reach out to thousands of MSMEs and bridge the critical financing gap these businesses face, while enabling businesses to enhance operations and capitalise on growth opportunities. 

Boost Bank’s Term Loan financing offers MSMEs a convenient application process with minimal documentation required for loan amounts from RM50,000. The facility features a financing tenure of up to 36 months with no early settlement fees, facilitating effective cash flow management by MSME borrowers. Businesses can also enjoy flexible repayment options to be more in sync with their cash flow needs without incurring any penalty. 

The Revolving Credit financing offers MSMEs flexibility to manage their cash flow and rise to business opportunities with ease with its swift financing disbursement feature, which enables businesses to receive funds in as fast as two working days upon approval of the loan. 

Fozia Amanulla, CEO of Boost Bank, shared, “At Boost Bank, we understand the unique needs of MSMEs and the critical role financing plays in their growth. In line with our mission to drive financial inclusion and growth for underserved communities, we are committed to providing a platform that opens doors to growth, empowering businesses to overcome challenges and achieve success. This partnership with CGC Digital strengthens our ability to offer seamless, fast, and accessible financing solutions, empowering MSMEs to overcome challenges and seize growth opportunities. We will continue to innovate transformative offerings that will elevate the MSME landscape in Malaysia.”

“Boost Bank is our first digital bank partner, marking a significant milestone in our journey towards facilitating access to financing with digital-first partners. By collaborating with Boost Bank, we can offer seamless, efficient, and accessible financial products that cater to the unique needs of MSMEs,” said Yushida Husin, CEO of CGC Digital. “This partnership is a significant step forward in our mission to support underserved MSMEs by providing them with the financing they need to succeed. It also aligns perfectly with the purpose for which CGC Digital was established—collaborating with digital-first partners. We are excited about the potential this partnership holds and are eager to explore further collaborations with other digital-first players in the industry. Our goal is to continuously enhance our offerings, ensuring that we remain at the forefront of financial innovation.”

Boost Bank and CGC Digital are committed to addressing the needs of underserved MSMEs and promoting financial inclusion while ensuring MSMEs receive the support they need to thrive in today’s economy.

To learn more about Boost Bank, please visit www.myboostbank.co. For more information about CGC Digital, please visit www.cgcdigital.com.my. 

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Addressing Food Security in Malaysia

Food security remains a critical concern for Malaysia as the nation grapples with challenges such as climate change, urbanization, a growing population and reliance on imported food. Despite the importance and urgency to address food insecurity issues, MSMEs in agriculture sector face significant hurdles in securing financing to grow their businesses and to enhance productivity. Many small-scale farmers lack the necessary collateral to secure traditional loans, which further limits their access to financial resources. A gap in financial literacy among farmers also hinders their ability to navigate complex financing options effectively. Furthermore, agriculture segment is often perceived as a high-risk sector due to its vulnerability to climate change and market volatility, making financial institutions hesitant to extend credit.

Potential Impact on Local Farmers

The collaboration between CGC Digital, Funding Societies, and FarmByte aims to have positive impact on local farmers. By providing innovative financing options, local farmers will have better access to the capital needed for sustainable operations and business expansion. Improved financial literacy and access to modern agricultural technologies will enhance farmers’ productivity and efficiency. Implementing risk assessment and management strategies will help farmers manage uncertainties related to climate change and market fluctuations. The focus on sustainability will ensure that farming practices are environmentally friendly and economically viable in the long term. By addressing the financial challenges faced by farmers, this collaboration will empower them to become more resilient and self-sufficient.

Yushida Husin, Chief Executive Officer of CGC Digital said, “At CGC Digital, we are deeply committed to supporting initiatives that address the critical issue of food security in Malaysia. By collaborating with Funding Societies and FarmByte, we aim to close the funding gap and enable local farmers with financial access they need to thrive. We believe that leveraging farming data as an alternative credit scoring metric will not only enhance the accuracy of credit assessments but also provide a more inclusive and supportive financial ecosystem for our agricultural MSMEs. This collaboration is a significant step towards building a resilient and sustainable agricultural sector that can meet the growing demands of our nation.”

Wong Kah Meng, Group Chief Operating Officer and Chief Executive Officer of Funding Societies Malaysia remarked, “This partnership with CGC Digital reflects our shared commitment to empowering underserved businesses across Malaysia. We strive to build a more inclusive financing ecosystem that fuels the growth of micro and small enterprises. By integrating CGC Digital’s expertise in credit enhancement with Funding Societies’ advanced digital financing platform, on the back of FarmByte’s agricultural ecosystem, we aim to empower farmers and agribusinesses with greater access to capital that they need to expand, create jobs, and drive economic progress. This collaboration not only strengthens the agricultural value chain but contributes to food security and economic resilience in Malaysia.”

According to Syed Aiman Kifli Syed Jaafar, Chief Executive Officer of FarmByte, the partnership with CGC Digital and Funding Societies aligns with the company’s vision to revolutionize farming by providing farmers with both financial and technological resources. “Our goal is to empower MSMEs in the agriculture sector with greater access to financing, enabling them to scale their businesses and enhance productivity,” he shared. “Through this collaboration, we are bridging the financial gap and equipping agropreneurs with the resources and support needed to drive a more resilient and sustainable agrofood ecosystem.”

A Collaborative Approach to Empower MSMEs

Through this MoU CGC Digital, Funding Societies, and FarmByte will leverage their combined expertise to implement innovative financing solutions that address the unique needs of MSMEs in the agriculture sector. CGC Digital will play the key role of mitigating risks as a leading credit guarantee provider and enhance its probability of default model with farm-level data as an alternative risk measurement for agribusinesses, thereby de-risking lending and improve access to financing through data-driven credit evaluations.  Funding Societies, will provide fast, flexible funding solutions utilizing alternative credit assessments to serve underserved farmers and agribusinesses that may lack traditional collateral. FarmByte, will contribute farm-level data and insights to enhance credit scoring models, improving risk evaluation and financial inclusion.

About FarmByte

FarmByte is pioneering a new era in Malaysia’s agrofood industry through innovative technology and data-driven solutions. As a subsidiary of Johor Corporation (JCorp), FarmByte is committed to enhancing national food security, improving production efficiency, and uplifting the livelihoods of farmers across Malaysia.

For more information, please visit: www.farmbyte.com

About CGC Digital

CGC Digital is a FinTech company, established as the digital arm of Credit Guarantee Corporation Malaysia Berhad. Registered in July 2022, its primary goal is to empower Micro, Small, and Medium Enterprises (MSMEs) by creating a simpler and more seamless financing experience in the digital ecosystem.

For more information about CGC Digital, please visit www.cgcdigital.com.my

About Funding Societies | Modalku

Funding Societies | Modalku is the largest unified SME digital finance platform in Southeast Asia. It is licensed in Singapore, Indonesia, Thailand, registered in Malaysia, and operates in Vietnam. The FinTech company provides US$1 billion annually of business financing to small and medium-sized enterprises (SMEs). In recent years, it has made strategic milestones including its acquisition of regional digital payments platform CardUp and co-investment into Bank Index in Indonesia.

Funding Societies | Modalku is backed by SoftBank Vision Fund 2, Maybank, Khazanah Nasional Berhad, CGC Digital (the digital arm of the Credit Guarantee Corporation Malaysia Berhad), SBVA (previously SoftBank Ventures Asia), Peak XV Partners (previously Sequoia Capital India), Alpha JWC Ventures, SMBC Bank, BRI Ventures, VNG Corporation, Rapyd Ventures, Endeavor, EBDI, SGInnovative, Qualgro, and Golden Gate Ventures among others.

It has received accolades through the years including: Brands for Good (2019, 2023), Global SME Excellence Award, Global SME Finance Awards by IFC (2021-2023) Global Startup Awards (2020), MAS FinTech Award (2016, 2021), Singapore’s Fastest-Growing Companies 2024 (a list of 100 companies compiled by The Straits Times and Statista), High-Growth Companies in Asia-Pacific 2024 (a list of 500 companies compiled by the Financial Times and Statista) .

For more information, please visit: www.fundingsocieties.com.my

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The expansion of the partnership marks a key milestone following CGC Digital’s investment in Funding Societies earlier this year. It represents a major step forward in providing critical support to Malaysia’s MSMEs, positioning them for greater success amidst a competitive and dynamic economy. Funding Societies together with CGC Digital have developed two new digital credit guarantee products: Digital Term Financing and Micro Credit Line. These products not only provide access to financing but also offer micro and small businesses profit rate savings of up to 2% per annum.

In addition to Digital Term Financing and Micro Credit Line, Funding Societies and CGC Digital have expanded its DSCF programme to include a broader range of industries and suppliers with longer tenors, as part of the joint continuous effort to bridge the gap and address the challenges in micro and small businesses in accessing financing.

As at publication, since the launch of the two new programmes in September, more than RM10 million has been disbursed, benefiting over 200 creditworthy micro and small enterprises. This further underscore both organisation’s commitment to fostering financial inclusion and growth for Malaysia’s MSMEs and validates the demand for such financing solutions among micro and small businesses.

These initiatives align with the broader goal of focusing on inclusivity, digital growth, and sustainability, as well as enhancing MSMEs’ long-term resilience and competitiveness both domestically and internationally.

Chai Kien Poon, Country Head of Funding Societies Malaysia, remarked, “This partnership with CGC Digital represents a shared vision of empowering underserved businesses in Malaysia. We are committed to creating a more inclusive financing ecosystem that supports the growth of micro and small businesses across Malaysia. By combining CGC Digital’s extensive expertise in credit enhancement with Funding Societies’ state-of-the-art digital financing platform, our digital financing solutions allow business owners to access the capital they need to expand, employ, and contribute to the economy enabling improved access to capital and fostering financial inclusion.”

Yushida Husin, Chief Executive Officer, CGC Digital said, “I am delighted with the extended partnership, which has already made a profound impact on the financial accessibility for Malaysian MSMEs. This extension is a testament to our unwavering dedication to financial inclusion and product innovation. Furthermore, I am also excited for the expansion of our partnership, where we continue to push boundaries through product innovation. By breaking new ground, we are not just providing access to financing; we are enabling dreams and driving economic growth. Our joint efforts are paving the way for a future where every business has the opportunity to succeed and thrive.”

MSMEs make up more than 97% of businesses in Malaysia, contribute 39% to Malaysia’s Gross Domestic Product (GDP) and employ a substantial portion of the workforce. However, these businesses are often constrained by limited access to financing options. By joining forces, Funding Societies and CGC Digital aim to strengthen the financial backbone of the Malaysian economy, fostering resilience and economic growth through improved access to capital.

About Funding Societies | Modalku

Funding Societies | Modalku is the largest unified SME digital finance platform in Southeast Asia. It is licensed in Singapore, Indonesia, Thailand, registered in Malaysia, and operates in Vietnam. The FinTech company provides US$1 billion annually of business financing to small and medium-sized enterprises (SMEs). In recent years, it has made strategic milestones including its acquisition of regional digital payments platform CardUp and co-investment into Bank Index in Indonesia.

Funding Societies | Modalku is backed by SoftBank Vision Fund 2, Maybank, Khazanah Nasional Berhad, CGC Digital (the digital arm of the Credit Guarantee Corporation Malaysia Berhad), SBVA (previously SoftBank Ventures Asia), Peak XV Partners (previously Sequoia Capital India), Alpha JWC Ventures, SMBC Bank, BRI Ventures, VNG Corporation, Rapyd Ventures, Endeavor, EBDI, SGInnovative, Qualgro, and Golden Gate Ventures among others.

It has received accolades through the years including: Brands for Good (2019, 2023), Global SME Excellence Award, Global SME Finance Awards by IFC (2021-2023) Global Startup Awards (2020), MAS FinTech Award (2016, 2021), Singapore’s Fastest-Growing Companies 2024 (a list of 100 companies compiled by The Straits Times and Statista), High-Growth Companies in Asia-Pacific 2024 (a list of 500 companies compiled by the Financial Times and Statista) .
For more information, please visit: www.fundingsocieties.com

About CGC Digital

CGC Digital is a FinTech company, established as the digital arm of Credit Guarantee Corporation Malaysia Berhad. Registered in July 2022, our primary goal is to empower Micro, Small, and Medium Enterprises (MSMEs) by creating a simpler and more seamless financing experience in the digital ecosystem.
For more information about CGC Digital, please visit www.cgcdigital.com.my.

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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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