by Tunku Danny Nasaifuddin Mudzaffar
It is no secret that we have experienced hyper-growth in the digital financial services sector in Malaysia, not just due to our rapidly advancing technological capabilities, but out of sheer necessity as consumers are forced to stay home due to continued lockdowns and movement control orders. Physical and social distancing have rendered us unable to execute everyday tasks in person, and we have no choice but to take the digital route with many aspects of everyday life. The case for digital financial services is strong, recently seen with over 40 consortiums made up of state governments, traditional banks, e-wallet players, and listed conglomerates amongst others, all vying for the 5 digital banking licenses on offer from Bank Negara Malaysia (BNM). This is further underpinned by the fact that Malaysia is ripe for digital financial services; with smartphone penetration at 78% and internet penetration at 87.4% (MCMC, 2018). However, to truly experience digital financial services now, have a look at the great strides the Securities Commission Malaysia (SC) has implemented since it started regulating ECF (Equity Crowd Funding) in 2015 and regulating P2P (Peer-to-Peer) Financing in 2016. There are now 21 operators offering ECF or P2P Financing, with microLEAP being one of them, that provide a truly online experience in digital investments and digital financing.
Now how do we provide this access to the underserved? In Malaysia, the majority of the underserved are micro-enterprises or people from the Bottom 40% Income Group (B40) who often struggle to access financial services such as loans or investments. As the needs of the underserved are often smaller, it is expensive for traditional lenders to provide loans in such small amounts and the costs or minimum investment amounts are too prohibitive for the underserved for it to make economic sense. Therefore, it is up to the digital financial services operators that may provide smaller financings and smaller investment products to take up the mantle and provide these services to the underserved. Without them, MSMEs (Micro, Small and Medium Enterprises) that account for 98.5% of registered businesses in Malaysia (Dept of Statistics, 2016) will surely struggle.