Need for alternative financing options for SMEs also discussed

KUALA LUMPUR: The need for alternative financing options for SMEs and the over-regulation by authorities faced by fintech (financial technology) companies were among the key arguments raised at a discussion among stakeholders of the financial sector.

Titled “Will Fintech disrupt the future of capital-raising?”, the session at the IFN Forum Asia 2017 saw representation from the traditional banking sector and fintech companies as well as the SME segment.

SME Corp Malaysia deputy CEO (II) Mohd Rithaudden Makip noted that Malaysia had been progressive in terms of facilitating the entry of fintechs, particularly to cater to the needs of the SMEs.

“SMEs represent about 97% of business establishments in Malaysia and this means many of them will require financing.

“Fintech companies provide alternative financing opportunities for these smaller firms,” he said.

Mohd Rithaudden noted that banks were highly regulated and and SMEs were seen as high-risk when it comes to lending.

He also cited Bank Negara’s financial stability and payment systems report which stated that there was a RM21.8bil gap in financing for SMEs which could be filled by alternative financing such a crowdfunding and peer to peer lending.

The report had stated that in 2015, banks had rejected SME financing applications totaling RM25.1bil.

Standard Chartered Bank Malaysia chief information officer Datuk Arif Siddiqui noted that Malaysia was at the early stages of the fintech journey.

“The trust factor will have to come in, and these alternative funding channels will grow.

“Although banks are also doing the same thing - lending money- we have different regulatory challenges and requirements.

“P2P platforms are getting an easier way to go about it but there is an acceptance required in the market.

“They will need to gain the trust in of consumers the way consumers have trusted in banks over the years,” he said.

Malaysian fintech company MoneyMatch co-founder Naysan Munusamy said in terms of the fintech sandbox among countries in South-East Asia, Malaysia was one of the most regulatory-friendly countries today.

In November, the Securities Commission appointed six parties to run peer-to-peer (P2P) financing platforms making Malaysia the first country in Asean to regulate this segment of fintech.

Naysan said the launch of the Financial Technology Enabler Group (FTEG) by Bank Negara had also boosted the growth of fintech firms in the country.

“There are challenges (in getting approvals and licensing) but it has been proven that it can be overcome,” he said.

TrustExec founder Alex Armstrong spoke about overregulation, saying fintech will disrupt the future of capital-raising - if it is allowed to.

“Anything that is a disruptive technology by its very nature will be doing something that nobody has done before.

“The biggest issue that surrounds the financial services industry is regulation.

“We need to move from the situation at the moment whereby the regulatory environment has not really caught up with how fintech is developing, whether it is blockchain or different methods of financing,” he said.