Khazanah Nasional Berhad (Khazanah) and CGC Digital Sdn Bhd (CGC Digital) has invested into Singapore-headquartered fintech startup Funding Societies, according to a press release today (January 3, 2024).
Dubbed the largest unified small and medium enterprise (SME) digital finance platform in Southeast Asia, Funding Societies will use the funds to broaden financing access to unserved and underserved businesses.
The fresh funds will help Funding Societies expand its Malaysian coverage to areas beyond Kuala Lumpur, Selangor, Penang, and Johor.
On top of that, the funding will enable the company to widen the reach of its Islamic financing solutions, which were introduced in Malaysia in May 2023. It has already disbursed over RM100 million in Shariah-compliant financing in Malaysia.
Specifically, Funding Societies aims to have more than 50% of its annual loan disbursements from Shariah-compliant financing by 2025.
The platform also targets to serve more than 25,000 MSMEs across Malaysia by the end of 2025, the release stated.
Closing the funding gap
Funding Societies finances micro, small, and medium enterprises (MSMEs) who are typically unserved by existing financial institutions. Since its inception, it has disbursed over US$3.5 billion (RM16 billion) in business financing through five million transactions.
Established in 2015, Funding Societies was one of the first companies to be registered as a Recognised Market Operator by the Securities Commission Malaysia.
The press release stated that in the context of Malaysia, Funding Societies aims to address the RM90 billion funding gap for MSMEs, as reported by the Securities Commission.
Given Funding Societies’ mission, Khazanah’s investment in it falls under its Dana Impak mandate under the Advancing Malaysia strategy.
As the release stated, this investment complements the government’s aspiration of enhancing MSMEs’ performance through greater access to financing, creating opportunities and promoting socioeconomic growth for rural, semi-urban, and underserved communities.
Khazanah is joined by CGC Digital in the investment. CGC Digital is the digital arm of Credit Guarantee Corporation (CGC) Malaysia Berhad, and has the same goal as Funding Societies, which is to empower micro, small, and medium enterprises (MSMEs).
It accomplishes this by creating simpler and more seamless financing experience in the digital ecosystem.
In 2023, CGC Digital partnered with Funding Societies to develop a new digital credit guarantee product for CGC Malaysia Berhad, offering financing up to RM4 million as a start.
MSMEs are regarded as the backbone of the Malaysian economy, comprising a whopping 97% of total businesses locally, the release stated. Securities Commission Malaysia also stated that this group contributes around 60% of the GDP.
Despite that, they still face challenges in obtaining credit. Thus, financing platforms such as Funding Societies are crucial to help bridge the RM90 million funding gap, creating an environment that better empowers local businesses and entrepreneurs.
Featured Image Credit: Funding Societies CEO, Kelvin Teo