Malaysia Fintech ecosystem
According to the World Bank (2020), Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010. Moreover, Malaysia economy is expected to achieve its transition from an upper middle-income economy to a high income economy by 2024. Also, Malaysia is in 45th place in the ranking of GDP per capita according to the International Monetary Fund (2018) and as of 2020, it´s poverty rate was 5.6%
In Malaysia, SMEs have a significant role in the country’s economy as they contributed 36% to the gross domestic product (GDP) in 2016. Also, 98.5 percent of business establishments in Malaysia are SMEs and there are 907,065 establishments of SMEs in Malaysia (Smeinfo, 2020)
Despite the growth of the Fintech industry in Malaysia, many small businesses still rely on traditional sources of loans: savings, loans from family and friends, and non-bank lenders such as pawn shops. Moreover, digitalization is still developing, since only 44 percent of SMEs are using cloud computing. Most have not adopted cloud software-as-a-service to drive software process improvements (Asean Post, 2020)
Fintech in Malaysia
According to the Fintech Malaysia Report 2019 by Fintech News, there are close to 200 players offering Fintech services. Moreover, it is ranked 36th among countries with the greatest advance in the Fintech sector and its main Fintech sector is digital payments and wallets with 19.19 percent of the total number of Fintechs in Malaysia each one (Findexable, 2019)
The growth of the middle class, high mobile phone penetration rates and strong government support for the digital economy is contributing to the Fintech innovation development, however there is still work to do.
Regulation is an important topic in Malaysia in order to ensure that the financial system remains safe amid the possibility of cybersecurity incidents. Also, there are some policies and initiatives in place, aimed at encouraging the young talent to put their time and effort into projects to help boost the existing Fintech startup scene (Finextra, 2020)
Lending Fintech
Another sector that is gaining more attention is the lending sector, which represents the 7.07% of the total number of fintechs in Malaysia (IMF, 2020)
In 2020 the Ministry of Housing and Local Government unveiled a new guideline that will allow for licensed moneylenders to provide loans digitally, so this can significantly speed up the market’s ability to address the lending needs of the underserved. This will also allow more fintechs will be granted permission to offer digital loans in Malaysia Furthermore, The Securities Commission (SC) has also been working with the government to launch the Malaysia Co-Investment Fund (MYCIF) of RM50 million (US$12.3 million) targeted at capital markets, including companies listed on the Leading Entrepreneur Accelerator Platform (LEAP) (Fintech news, 2020).
Given that there is still a high percent of SME´s that lack of funding; Fintechs represent a good opportunity to reduce this lending gap and this will also allow Malaysia to continue its economy growth which has been going on for a few years
