Government Seeks Better SME Financing to Boost Productivity

Malaysia must focus on improving the quality of financing available to small and medium enterprises (SMEs), rather than simply increasing the amount of credit distributed, Economy Minister Akmal Nasrullah Mohd Nasir said.

He stressed that businesses need funding that supports meaningful investment, expansion and productivity improvements, allowing local companies to compete more effectively in international markets. The government also wants stronger businesses to create better-quality jobs and provide workers with opportunities to earn higher wages.

World Bank Recommends Broader Financing Options for Local Businesses

Akmal said conventional loan requirements, particularly the need to pledge property as collateral, could prevent viable businesses from accessing financing.

He said other assets, including machinery and accounts receivable, should also be considered to widen funding opportunities. He added that financing mechanisms must be more transparent and better suited to businesses’ actual needs.

The World Bank’s latest Malaysia Economic Monitor found that about 38 per cent of Malaysian firms had loans or credit facilities, while approval rates increased from 68 per cent in 2015 to 86 per cent in 2024.

However, SMEs still relied heavily on internal funds for fixed-asset investments, with limited access to equity and other risk capital. Akmal said improving financing quality supports the objectives of the 13th Malaysia Plan.

Malaysia wants to improve SME financing quality to help local businesses expand, raise productivity and create better-paying jobs.

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