Funding Malaysia’s SMEs is about quality and not quantity, says economy minister

Economy Minister Akmal Nasrullah Mohd Nasir speaks at the public launch of the Malaysia Economic Monitor October 2026 at the Asian Institute of Chartered Bankers in Kuala Lumpur on November 11, 2026. — Picture by Firdaus Latif

By R. Loheswar

First Published: Wednesday, 11 Nov 2026 4:48 PM MYT

KUALA LUMPUR, Nov 11 — The government wants to improve the quality of financing for small and medium enterprises (SMEs) to strengthen local firms’ global competitiveness and enable workers to earn higher wages and hold better-quality jobs.

Although Malaysia had recorded encouraging economic growth, Economy Minister Akmal Nasrullah Mohd Nasir said today that structural challenges still needed to be addressed so that SMEs could expand and improve productivity.

He said the main challenge was no longer simply ensuring firms had access to credit, but making sure the financing met their investment and expansion needs.

“The real issue is the quality of funding being channelled. It is not just about how firms obtain credit, but how we ensure our firms remain competitive globally.

“Particularly in ensuring productivity improvements that can eventually translate into higher wages and quality employment,” he told reporters after the launch of the World Bank’s 33rd Malaysia Economic Monitor, titled ‘From Quantity to Quality: Financing Malaysia’s Productive SMEs’, here today.

Akmal said the government had taken note of the World Bank’s recommendations, including broadening the range of assets that could be accepted as collateral.

He said relying on conventional collateral such as property could limit firms’ access to loans, even when they had other assets that could serve as security.

“Among the problems in obtaining loans is the collateral requirement, which typically requires property to be pledged as security.

“Yet firms also have other assets that should be considered, such as machinery and accounts receivable, to broaden the financing options available to them,” he said.

He added that financing mechanisms also needed to be implemented more transparently so that firms received facilities suited to their needs.

The report found that about 38 per cent of firms in Malaysia had loans or credit facilities, while loan approval rates rose from about 68 per cent in 2015 to 86 per cent in 2024.

However, it also found that SMEs still financed about two-thirds of their fixed-asset investments with internal funds, while external financing relied heavily on bank debt, with limited access to equity and other forms of risk capital.

The World Bank also highlighted that financing constraints could undermine firms’ ability to invest in innovation, improve productivity and expand.

Akmal said the push to improve financing quality was in line with the government’s aspirations under the 13th Malaysia Plan, particularly in raising productivity and strengthening economic competitiveness.

He said Malaysia’s economy remained resilient, having expanded 6.0 per cent in the second quarter of 2026, with the Department of Statistics Malaysia’s advance estimate showing 5.3 per cent growth in the third quarter.

The World Bank had also raised its 2026 growth forecast for Malaysia to 5.1 per cent, up 0.7 percentage point from its previous projection.

The Malaysia Economic Monitor is the World Bank’s regular assessment of Malaysia’s economic developments and outlook, and its 33rd edition focuses on how financing instruments can help SMEs overcome investment constraints, improve productivity and grow.