Introduction

Good evening, esteemed guests and welcome. It’s a privilege to address you today on a topic of paramount importance to Malaysia’s economic vitality. 

MSMEs : The need to empower the backbone of Malaysia’s Economic Growth 

MSMEs contribute a significant 39.1%* to our national GDP and employ a substantial 48.5%* of our workforce. They are, without a doubt, a cornerstone of our economic prosperity.

However, these businesses need the right support to flourish. Access to financing is absolutely critical for them to grow, compete, and truly thrive.

It is estimated that a RM 290 billion** financing gap is required to empower our MSMEs.

MSMEs unfortunately face significant hurdles when seeking traditional financing. The crux of these challenges lies in the mismatch between the risk profile of these businesses and the risk appetite of traditional financial institutions.

These challenges highlight the need for alternative financing solutions. And that's where innovative approaches like Equity Crowdfunding (ECF) and Peer-to-Peer (P2P) financing come into play. 

* Micro, Small & Medium Enterprises (MSMEs) Performance 2023, DOSM
** Catalysing MSME and MTC access to the capital market: 5 year roadmap [2024-2028]

These digital platforms are bridging the gap by connecting MSMEs directly with investors seeking flexible and tailored investment opportunities.

By providing access to vital risk capital, these alternative financing models are empowering MSMEs to overcome traditional barriers and fuel their growth.

And this brings me to a key initiative in Malaysia: the Malaysia Co-investment Fund, or MyCIF, funded by the Ministry of Finance. 

Malaysia Co-Investment Fund (MyCIF) co-invests with private investors into MSMEs, through ECF and P2P 

Malaysia Co-investment Fund (MyCIF) is a Malaysian story, on how we pioneered a public-private partnership that has revolutionised MSME financing, by co-investing alongside private investors into MSMEs through these ECF and P2P platforms.

This co-investment model is not just about providing funds; it's about building confidence and attracting private capital, thereby bolstering the availability of the much-needed risk capital. 

Here's how it works: MyCIF co-invests alongside private investors through eligible Equity Crowdfunding (ECF) and Peer-to-Peer (P2P) platforms.

For every RM1 invested by private investors in the General Scheme, MyCIF matches it with RM4, significantly amplifying the capital available to MSMEs. This funding supports both early-stage investments and essential working capital.

Furthermore, MyCIF has tailored schemes to address specific needs. The Food Security Scheme provides a 1:2 co-investment ratio for businesses in upstream agriculture and bio-economy, recognising their crucial role in our national food security.

Similarly, the Environmental and Social Impact (ESI) Scheme offers a 1:2 co-investment ratio for impact businesses aligned with MyCIF's focus areas, driving sustainable and responsible growth.

MyCIF: A Sustainable Blended Finance Model 

MyCIF is a sustainable blended finance model that leverages the ‘wisdom of the crowd’. 

The numbers speak for themselves: Over RM1 billion has been co-invested, supporting more than 70,000 ECF and P2P campaigns.

Since inception, we witnessed private investment grow 4.1 times alongside MyCIF, demonstrating the powerful synergy of this public-private partnership. 

MyCIF also maximises its impact by reinvesting returns and repayments. Specifically on P2P platforms, every RM1 from MyCIF is re-invested 9 times over, creating a powerful multiplier effect. 

This 'skin-in-the-game' approach by the government demonstrates our commitment to MSME growth. Over 9,500 MSMEs have received government’s co-investments since MyCIF's inception, instilling confidence in the market. 

MyCIF's proven model is now being replicated through the establishment of the Strategic Co-Investment Fund (CoSIF) in February this year. This new co-investment fund was established to support the strategic priorities of the New Industrial Master Plan (NIMP) 
2030.

Building MSME resilience during pandemic 

MyCIF is not just a funding mechanism, but a strategic tool that can be used to provide targeted support to address key economic and social challenges.

The impact was particularly evident during the unprecedented challenges of the pandemic. MyCIF stepped in to provide temporary relief to all businesses raising funds on ECF and P2P platforms for continued business growth and enable digital pivots. 

We introduced a temporary relief co-investment ratio of 1:2, effectively doubling our co-investment size, to help MSMEs navigate the economic downturn. This intervention was instrumental in sustaining businesses, as exemplified by Nityo Infotech (Nityo), an IT services and solutions company. Nityo acknowledged that MyCIF, via CapBay, was crucial to their pandemic survival and growth. 

MyCIF also played a key role in enabling digital transformations. We saw traditional businesses, like 'Meet Mee', a brick-and-mortar 'pan mee' restaurant, successfully pivot to digital sales. Similarly, 'Bunpah', a 'pisang goreng' stall, expanded to cater for online food delivery after raising RM 15,000 via P2P on microLEAP, resulting in a 30% increase in sales.

By implementing a higher investment ratio during the height of the 2020 pandemic, MyCIF increased its share of funding from 4% in 2019 to 23% in 2020, effectively sustaining access to funds.

This underscores MyCIF's agility and responsiveness to the evolving needs of our MSMEs. It demonstrates our commitment to not only supporting their growth in stable times but also providing crucial lifelines during periods of crisis.

MyCIF supports startups in their growth journey 

Through MyCIF’s co-investments on the ECF platforms, we have seen greater fuel to the growth journey of startups.

Many who started small with MyCIF have gained the confidence and visibility needed for subsequent fundraising rounds, including attracting venture capital.

We have seen MyCIF enabling companies to expand beyond domestic markets, achieving regional and even international presence.

A prime example is Angkasa X, a tech-social inclusion company with an ASEAN presence, which filed for listing on Nasdaq, demonstrating the power of alternative financing.

Further, to boost domestic investment and growth in strategic sectors, the MOF's GEAR-uP initiative will pilot a coordinated funding approach. This involves connecting promising companies, already supported by programs like MyCIF, with institutional capital providers like Dana Impak, Dana Perintis, and Jelawang, ensuring continuous funding throughout their growth lifecycle.

Catalysing Financing in support of National Priorities 

We have been able to use MyCIF as a tool to power our national priorities.

Through MyCIF, the government has been able to extend its reach to MSMEs. Approximately 93% of MyCIF recipients are diverse MSMEs, and we have seen a four-fold increase in investments into micro-enterprises from 2020 to 2023.

We have strategically guided investments into key areas such as food security and environmental and social impact segments.

And now, we are looking forward to the future of Islamic Finance. To spur innovation in Islamic finance and complement existing schemes, RM40 million has been allocated to MyCIF under Budget 2025.

Effective from 2025 until December 2026, MyCIF has introduced a new incentive that promotes risk-sharing solutions for equitable financial structures, where profits and losses are shared among investors and businesses, fostering ethical and sustainable economic growth.

This new incentive is aimed at making Islamic risk-sharing financing more accessible to MSMEs.

Conclusion

In conclusion, MyCIF stands as a testament to the power of a strategic public-private investment partnership, not just for Malaysia, but as a potential model for the entire ASEAN region.

It showcases how innovative blended finance, through the power of digital platforms and the wisdom of the crowd, can collaboratively empower a nation’s agenda in a sustainable way.

Together, by embracing innovative financing models like MyCIF, we can build a stronger, more resilient, and more prosperous future for Malaysia and for the entire ASEAN community.

Thank you.

Click here for Innovative Solutions for the Capital Market & Enabling Access for MSMEs

--BERNAMA