Connecting business owners with suppliers through Supply Chain Financing (SCF) solution | Fynance

17 Feb, 2023

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Small and Medium Enterprises (SMEs) are an essential part of any country's economy. They contribute to employment, innovation, and economic growth. In Malaysia, SMEs make up 98% of businesses, and they employ more than seven million people. However, they face several challenges, including a lack of financing, tight cash flow, and difficulty in finding reliable suppliers. These issues can prevent them from growing their businesses, increasing their revenue, and creating more jobs.

Traditional Banks in Malaysia are at Risk of Losing SME Business in 2022 to New Avenues For many years, SMEs in Malaysia have relied on traditional banks for financing. However, traditional banks have become more risk-averse in recent years, making it harder for SMEs to obtain loans or financing. This has resulted in many SMEs turning to alternative financing sources, such as peer-to-peer lending, crowdfunding, and supply chain financing (SCF).

Talk about Issues Faced by SMEs

SMEs in Malaysia face several issues that can hinder their growth and success. One of the most significant challenges is access to financing. Many SMEs struggle to obtain financing from traditional banks due to their lack of credit history, limited collateral, and other factors. Additionally, SMEs often have tight cash flow, which can make it difficult to pay suppliers on time or invest in new projects.

SMEs often have limited resources compared to larger businesses. This can make it challenging to compete with larger companies in the same industry. For example, SMEs may have limited marketing budgets, making it harder to reach new customers and expand their reach. Similarly, they may not have the resources to invest in new technologies or equipment, which can limit their ability to innovate.

Finding skilled and experienced employees can be challenging for SMEs, particularly in specialized fields. This can hinder their ability to innovate and grow, as they may not have the resources to hire or train the talent they need.

SMEs often struggle with regulatory compliance, which can be a significant burden on their resources. This is particularly true for SMEs in highly regulated industries, such as finance or healthcare. Compliance with regulations can require significant time and resources, which can limit SMEs' ability to invest in growth and innovation.

SMEs often have limited access to market information and industry insights. This can make it challenging to make informed decisions about their business, such as identifying new opportunities or understanding their competitive landscape.

SMEs in Malaysia often face challenges with infrastructure and logistics. For example, inadequate transportation systems can make it challenging to move goods and supplies, while limited access to technology can make it difficult to connect with customers and suppliers. 

(Photo by easyasia)

How Difficult it is to Get a Loan/Borrowing from Traditional Banks

Obtaining a loan from traditional banks can be lengthy and challenging for SMEs. Banks often require extensive documentation and collateral, which can be challenging for many SMEs to provide. Additionally, banks may take several weeks or months to make a lending decision, which can be frustrating for SMEs that need funds quickly.

Another challenge that SMEs face when trying to obtain financing from traditional banks is the strict eligibility criteria set by these institutions. Banks tend to impose rigid credit standards and require significant collateral, which may be unattainable for many small businesses. These requirements are often based on the borrower's creditworthiness and financial history, which can be challenging for new and small businesses that have not yet established a track record.

In addition, traditional banks typically require a detailed business plan and financial projections, which can be difficult for SMEs to prepare, especially if they lack the expertise or resources to create such programs. This requirement also means that SMEs have to invest a significant amount of time and effort in developing a comprehensive business plan before approaching banks for financing.

Another factor that makes it challenging for SMEs to obtain loans from traditional banks is their risk aversion towards lending to small businesses. Banks tend to view SMEs as a high-risk group, which increases the likelihood of loan rejections or higher interest rates. Moreover, banks may not offer flexible repayment terms, which can make it difficult for SMEs to manage their cash flow effectively.

All these challenges make it increasingly difficult for SMEs to obtain financing from traditional banks. The limited access to financing can hamper SMEs' ability to expand their business, invest in new equipment, or hire more staff. As a result, SMEs are left with limited options, and many resorts to alternative sources of financing such as borrowing from family and friends or dipping into their savings, which can be risky and unsustainable.

It is essential to recognize the significance of SMEs in driving economic growth and job creation in Malaysia. As such, the government and financial institutions need to work towards creating an environment that supports SMEs by providing alternative financing solutions that are easily accessible, affordable, and flexible. One such solution that is gaining popularity in recent years is Supply Chain Financing (SCF).

(Photo by Choco Up)

How SMEs are Going to Overcome this Issue?

Given the challenges of obtaining financing from traditional banks, SMEs in Malaysia are turning to alternative financing sources to meet their needs. Peer-to-peer lending and crowdfunding have become popular in recent years, providing SMEs with access to funding from a large number of investors. However, these platforms may not be suitable for all SMEs, and they often come with high-interest rates.

SCF is One of the Solutions, Talk about How SCF is Helping Business Owners and Suppliers Supply chain financing (SCF) is a financing solution that has gained popularity among SMEs in Malaysia. SCF is a type of trade finance that allows businesses to access funds by leveraging their supply chain. It is a collaborative approach to financing that involves business owners, suppliers, and financial institutions.

SCF allows suppliers to get paid more quickly, while also allowing business owners to extend their payment terms. This can help to improve cash flow for both parties, making it easier for them to invest in growth opportunities. In SCF, the financial institution provides financing to the supplier based on the creditworthiness of the business owner. This means that suppliers can access financing at lower interest rates than they would with other financing options.

Benefits of SCF for SMEs, including:

1. Improved Cash Flow

SCF can help to improve cash flow for both business owners and suppliers. By providing suppliers with faster payment terms, they can invest in their growth and expansion. Business owners can also benefit by extending their payment terms, which can improve their cash flow.

2. Lower Cost of Financing

SCF can be a cost-effective way for SMEs to access financing. Because the financial institution is providing financing based on the creditworthiness of the business owner, the interest rates are often lower than other financing options.

3. Improved Relationships

SCF can help to improve relationships between business owners and suppliers. Providing suppliers with faster payment terms makes them more likely to be satisfied with the business relationship. This can lead to increased trust, loyalty, and collaboration between the two parties.

4. Access to New Markets

SCF can also help SMEs to access new markets by providing them with the financing they need to expand their operations. This can be particularly useful for SMEs that are looking to grow their exports or move into new markets.

In Malaysia, several financial institutions are offering SCF solutions to SMEs. For example, Maybank has launched its Maybank2u SCF platform, which allows SMEs to access financing through their supply chain. CIMB Bank also offers SCF solutions for its corporate customers.


SMEs are the backbone of the Malaysian economy, and it is essential to support their growth and success. Access to financing is a crucial factor in enabling SMEs to grow and create jobs. However, traditional banks have become more risk-averse in recent years, making it harder for SMEs to obtain financing.

SCF is one of the solutions that can help to address this issue. By leveraging the supply chain, SMEs can access financing at lower interest rates, improve their cash flow, and expand their operations. Financial institutions in Malaysia are recognizing the benefits of SCF and are offering solutions to their customers.

As SMEs continue to face challenges, it is essential to explore new financing options to help them grow and succeed. SCF is one solution that can help to bridge the gap between business owners and suppliers, enabling them to collaborate and invest in their growth.

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