Iza Fazlina Binti Mohd Nor, a Malaysian entrepreneur from Georgetown, Penang, has been running her small food business for six years. From humble beginnings, her journey reflects the determination and resilience of Malaysia’s micro, small, and medium enterprises (MSMEs). With the support of imSME, a digital platform by CGC Digital Malaysia that provides financing and business solutions to help MSMEs grow, she has been able to explore new ways to strengthen and expand her business.

Building a Business from the Ground Up

Puan Iza started Nasi Campur Kak Iza to serve hearty, home-style dishes to her community. Like many small entrepreneurs, she faced daily challenges, from managing operations and attracting customers to maintaining a steady income.

“Running a small business comes with its challenges, but it also teaches you to stay determined and keep improving,” she said.

Her dedication to quality and service has helped her steadily grow a loyal customer base over the years.

Discovering Support Through imSME

Puan Iza first came across imSME through an online advertisement. The platform, developed by CGC Digital Malaysia, offers digital solutions including financing, digital guarantees, and insurance—designed to help MSMEs strengthen and grow their businesses.

As a small business owner, she often found it challenging to secure the right support to expand her operations. Through the imSME platform, she was able to explore solutions suited to her business needs and explore financing options designed for MSMEs.

While exploring the platform, she also noticed the imSME VIP Umrah Campaign, which encouraged her to engage further with the platform’s offerings.

“The campaign encouraged me to explore imSME further and showed me new ways to grow my business,” she shared.

A Meaningful Opportunity

Being selected as one of the campaign winners meant more than a prize. For Puan Iza, it represented a second chance to fulfil a spiritual aspiration she had long hoped for.

“I had previously tried to perform Umrah but was unable to, so this opportunity means so much to me,” she said.

Inspiring Others

Through her journey, Puan Iza hopes to inspire other entrepreneurs to remain resilient and take advantage of opportunities that can support their business growth.

Through imSME, CGC Digital Malaysia continues to empower the country’s MSME community by providing digital financing and business solutions tailored to their needs.

If you, like Puan Iza, want to explore financing solutions and support for your business, visit (https://imsme.com.my) today and register for free to discover how the platform can help your business grow.

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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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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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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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