Financing SMEs and Entrepreneurs 2026: Malaysia
Table of contents
According to the latest official data published by the Department of Statistics, Malaysia (DOSM), MSMEs accounted for 96.1% (1 086 386 firms) of all business establishments in Malaysia in 2024. This marks an increase of nearly 180 000 firms compared to 907 065 in 2015, reflecting an average annual growth rate of 2.0% over the period.
Credit conditions remained supportive of businesses’ financing needs, as financing to businesses grew by 5.1% in 2024 (2023: 3.7%). Of this, outstanding MSME financing growth continued to remain strong at 8.1% in 2024 (2023: 8.7%), supported by continued disbursements mainly for working capital purposes. MSME financing approvals also recorded higher approval rate of 81.5% as compared to 2023 with 80.9%.
The total value of MSME outstanding stock of loans has more than tripled in the last decade and a half, surging from MYR 141 billion in 2010 to MYR 418 billion in 2024 (2023: MYR 386 billion). The share of MSME financing within total business loans has expanded markedly from 38% in 2010 to 51% in 2024, indicating that MSMEs now account for more than half of all business lending, a notable increase from the pre-pandemic level of below 45%. In 2024, Malaysia’s central bank, Bank Negara Malaysia (BNM) prioritised initiatives which assisted businesses, especially MSMEs to build business resilience, improve access to finance and transition to green practices. BNM also directed efforts at raising financial literacy levels and understanding on-the-ground financial inclusion challenges to ensure effective interventions. The year 2024 recorded sustained momentum in MSME financing approvals, with over MYR 193 billion approved, an increase from MYR 187 billion in 2023, which reflects the continued confidence of financial institutions in supporting MSME growth and expansion.
Efforts to promote alternative financing to provide options and diversification to MSMEs have been amplified. The Securities Commission Malaysia (SC) continued to put efforts in spurring the growth of alternative financing as well as shoring confidence in this area. For the year 2024, a total of MYR 4.1 billion was raised via peer-to-peer (P2P) financing, equity crowdfunding (ECF) and venture capital/private equity (VC/PE), reflecting growing interest in supporting small businesses.
Among key market development initiatives introduced by SC in 2024 was the ‘Catalysing MSME and MTC Access to the Capital Market: 5-Year Roadmap (2024-2028)’ aimed to intensify efforts to advance this segment.
Despite challenges from the global macroeconomic environment, the Malaysian economy recorded higher growth, driven by stronger domestic demand and a rebound in exports. The Malaysian economy grew by 5.1% (2023: 3.6%), anchored by stronger domestic demand. Of significance, the ongoing investment upcycles led to the highest investment growth in a decade, with added impetus from the realisation of electrical and electronics (E&E) and information and communication technology (ICT) projects. Household spending remained resilient, benefitting from favourable labour market conditions, continued wealth accumulation and effective policy support.
On the external front, exports strengthened following improved demand from key trade partners and positive spillovers from the global technology upcycle. Meanwhile, imports grew at a much faster pace, driven by stronger demand for capital and intermediate goods to support rising investments and trade. From a sectoral perspective, services and manufacturing remained the primary growth drivers, with all sectors recording higher growth relative to 2023 due to improved domestic and external conditions.
In line with stronger domestic economic activity, outstanding loans grew higher at 5.6% (2023: 5%) while corporate bonds grew by 3.4% (2023: 4.2%). Households remained the major borrower segment, contributing to this growth, with continued labour market improvements providing impetus to credit demand. Meanwhile, business loans recorded higher growth driven mainly by an increase in investment-related loans, owing to the increase in private investment amid the positive economic and business outlook.
Across business sizes, loan growth in micro, small and medium enterprises (MSMEs) continued to be strong, while non-SMEs recorded a more modest increase given the availability of alternative funding sources such as capital market funding and retained earnings. Overall, credit conditions remained supportive of household and business needs, underpinned by stable loan approvals.
MSMEs are the driving force behind the nation’s competitiveness, innovation and resilience in facing global challenges. Their influence extends far beyond their numbers, shaping the business landscape through their remarkable resilience and adaptability. MSMEs are pivotal drivers of job creation, exports and economic growth. They navigate an array of challenges and capitalise available opportunities to rise in an ever-evolving market. According to the latest official data published by the Department of Statistics, Malaysia (DOSM), MSMEs accounted for 96.1% (1 086 386 firms) of all business establishments in Malaysia in 2024. This marks an increase of nearly 180 000 firms compared to 907 065 in 2015, reflecting an average annual growth rate of 2.0% over the period.
Based on the breakdown by key economic sectors, services sector comprised 84.4% of total MSMEs, equivalent to 917 070 firms. The construction sector remained the second largest, contributing 8.7% (94 152 firms). Meanwhile, 5.3% of MSMEs (57 187 firms) were involved in the manufacturing sector, followed by 1.4% (15 630 firms) in agriculture and the remaining 0.2% (2 347 firms) in the mining & quarrying sector.
Source: Department of Statistics Malaysia (DOSM), July 2025
In terms of business size, the majority of MSMEs in Malaysia were microenterprises, forming 70.1% (761 897 firms). Meanwhile, small-sized firms accounted for 28.2% (306 764 firms), while medium-sized firms constituted the remaining 1.6% (17 725 firms).
Source: Department of Statistics Malaysia (DOSM), July 2025
Malaysia’s MSMEs GDP grew by 5.8 % in 2024, contributing MYR 652.4 billion in value added, or 39.5 % of Malaysia’s GDP. MSMEs recorded a slightly higher growth compared to Malaysia’s overall GDP growth of 5.1 % in 2024. Comparing with the 2023 performance, the MSMEs GDP expanded by 4.9 %, with a value added of MYR 616.6 billion. Looking at the performance by sectors for the year 2024, the expansion of MSMEs value added was supported by steady performance in the Services and Manufacturing sectors, which comprise 84.7 % of the MSMEs’ GDP. This was followed by the Agriculture (8.7%), Construction (5.0%) and Mining & Quarrying (0.5%) sectors.
Exports of MSMEs amounted to MYR 196.8 billion, recording growth of 31.3 % compared to 3.0 % in 2023. This increase was supported by the Services and Manufacturing sectors, which grew by 114.8 % and 7.9 %, respectively. In addition, MSMEs’ exports accounted for 14.3 % of the total exports in 2024.
MSMEs' employment continued to register an increase, albeit at a slower annual growth of 3.1 % as compared to 3.5 % in 2023, reaching a total of 8.10 million persons. Accordingly, the contribution of MSMEs' employment to Malaysia's total employment in 2024 was 48.7 %, an increase of 0.2 percentage points compared to the previous year.
MSMEs' labour productivity improved by 2.6 %, reaching MYR 80 507 per person. All sector recorded growth in labour productivity, with the highest growth was recorded in the Construction sector (16.8%), followed by the Manufacturing (2.2%), Mining & Quarrying (2.0%), Agriculture (1.9%) and Services (1.6%) sectors.
Financial institutions have continued to demonstrate strong and consistent support for MSMEs, as evidenced by the significant growth in outstanding MSME loans over the past decade. The total value of these loans has more than tripled, surging from MYR 141 billion in 2010 to MYR 418 billion in 2024 (2023: MYR 386 billion).
In 2024, outstanding business loans recorded higher growth at 5.1% (2023: 3.7%) driven mainly by an increase in loans for investment-related purposes. The improvement in investment-related loans reflected the increase in private sector investment activities amid the positive economic and business outlook. In particular, this was more notable in sectors such as ICT and E&E. Large-scale public investment initiatives such as the NETR and the NIMP also contributed to spurring a stronger investment appetite among businesses, supporting the demand for financing. The pick-up in investment-related loans was more pronounced for SME borrowers, which continued to record a strong overall loan growth in 2024
Correspondingly, the share of MSME financing within total business loans has expanded markedly from 38% in 2010 to 51% in 2024, indicating that MSMEs now account for more than half of all business lending, a notable increase from the pre-pandemic level of below 45%.
Across business sizes, loan growth in micro, small and medium enterprises (MSMEs) continued to be strong, while non-SMEs recorded a more modest increase given the availability of alternative funding sources such as capital market funding and retained earnings. Overall, credit conditions remained supportive of household and business needs, underpinned by stable loan approvals.
Outstanding DFI financing grew by 5.6% to MYR 183.3 billion in 2024 (2023: 6% to MYR 173.5 billion), supporting more than 3 million MSMEs, including microenterprises, start-ups and the low-income group. The financing has yielded positive impacts, creating and sustaining employment for more than 130 000 individuals. Additionally, in 2024, more than 14 000 business customers were able to grow their businesses as evidenced by higher sales turnover and business expansion.
Following the Budget 2024 announcement, the restructuring of DFIs involving the merger of Bank Pembangunan Malaysia Berhad, SME Bank and EXIM Bank is well underway. By combining resources and expertise, the newly merged DFI is anticipated to offer more comprehensive financial solutions and capacity building initiatives, particularly to the unserved and underserved groups such as SMEs and Bumiputera enterprises.
The efficient mobilisation of capital is crucial for enhancing the sustainability and competitiveness of the Malaysian capital market. Towards this end, the Securities Commission Malaysia (SC) continues to improve market inclusivity and accessibility and enable more diverse investment options for investors spanning across both traditional and alternative markets.
Efforts are mainly focused on the augmentation of investment landscape and products, broadening of the derivative markets, expansion of players and products in the digital asset space and empowering purpose-driven innovation towards a dynamic market in this digital era. In tandem with reinforcing the existing financial ecosystem, fundraising avenues continue to be enhanced, particularly to support MSMEs and mid-tier companies (MTCs) in accessing growth capital and scaling their businesses.
The total number of registered corporations stood at 145 as of 31 December 2024. The venture capital segment accounted for 115 registered corporations (Venture Capital Management Corporation, VCMC and Venture Capital Corporation, VCC), while the private equity segment consisted of 30 registered corporations (Private Equity Management Corporation, PEMC and Private Equity Corporation, PEC). As at end 2024, the number of professionals employed by the industry with at least 4 years of experience stood at 278.
Note: Professionals with more than 4 years of experience
Source: Annual Report 2024, Securities Commission Malaysia
Total committed funds in the industry as at the end of 2024 stood at MYR 18.01 billion and MYR 6.70 billion for private equity (PE) and venture capital (VC) respectively, with a combined total of MYR 24.70 billion. For private equity, commitments are sourced largely from corporate investors (40.91%), individuals and family offices (16.77%) and financial institutions (13.27%).
For venture capital, government agencies and investment companies (35.99%), sovereign wealth funds (20.15%) and individuals and family offices (19.55%) make up the top 3 sources of funding.
VC investments in 2024 concentrated on growth stage (44.60%), followed by early stage (35.98%) and start-up stage (13.44%) opportunities. PE investments were primarily channelled into growth stage (83.82%), with some investments made in early-stage opportunities (16.18%). In total, 90 VC and PE deals were recorded in 2024.
Since its inception, ECF has garnered a total fundraising amount of MYR 776.15 million across 404 campaigns, with Shariah-compliant campaigns contributing 4% of the total funds raised. Total funds raised in 2024 decreased by 23% to MYR 97.57 million, compared to MYR 126.28 million in 2023. A similar declining trend is observed in the number of successful campaigns, which dropped from 51 in the previous year to 35 in 2024.
Despite the overall decline in total funds raised in 2024, there was an increase in the growth of larger campaigns, raising funds exceeding MYR 3 million. These constituted 31% of the campaigns in 2024, up from 25% in 2023
Wholesale and retail trade, repair of motor vehicles and motorcycles received the highest funding in 2024, amounting to MYR 24.67 million. Meanwhile, the agriculture, forestry, and fishing sectors experienced significant growth, with the total amount raised doubling to MYR 17.81 million in 2024.
Since its inception, P2P financing has raised a total of MYR 8.49 billion via 120 370 campaigns with 20% of the total funds raised contributed by Shariah-compliant campaigns (2023: 15%). In 2024, the total funds raised increased by 20% to MYR 2.51 billion, from MYR 2.09 billion in 2023. Likewise, total campaigns in 2024 increased to 34 512 from 31 002 in 2023.
Campaign sizes in 2024 continued to be of smaller fundraising amounts, with 66% of campaigns raising MYR 50 000 and below. Wholesale and retail trade as well as repair of motor vehicles and motorcycles remained the largest sector served in 2024, raising MYR 1.28 billion and contributing 51% of the total fundraising for the year.
In 2024, Bank Negara Malaysia (BNM) issued the Policy Document on Skim Pembiayaan Mikro (SPM) which aims to enhance access to financing and service quality to microentrepreneurs. The SPM financing limit is increased to MYR 100 000 (from MYR 50 000) without collateral. Guarantee schemes were also introduced by the Credit Guarantee Corporation in collaboration with participating financial institutions (PFIs) to support microentrepreneurs who might otherwise be assessed as too risky. Currently, 15 PFIs offer 42 microfinancing products under SPM, which have benefitted over 300 000 microentrepreneurs since inception. As at end-2024, outstanding financing under SPM grew by 19.2% to MYR 2.1 billion (end-2023: MYR 1.8 billion).
The Micro, Small and Medium Enterprises (MSMEs) and Mid-Tier Companies (MTCs) Roadmap aims to better position the capital market as an attractive and robust source of financing for MSMEs and MTCs. While MSMEs and MTCs traditionally rely on bank financing, there is much potential for the capital market to play a bigger role, diversifying the funding sources of MSMEs and MTCs while narrowing the financing gap that exists. Furthermore, greater inclusion of firms of all sizes signals a deep and well-diversified capital market, potentially attracting a greater supply of both domestic and foreign capital, and thus positioning Malaysia as a preferred fundraising destination for MSMEs and MTCs in the region. The target addressable universe of the MSME and MTC Roadmap is approximately 28 000 MSMEs, MTCs and startups with large economic impact and high potential to raise funds in the capital market
Five guiding principles form the underlying foundation for the MSME and MTC Roadmap’s nine cross cutting strategies and 36 initiatives. These are anchored on three key approaches namely regulatory and product innovation; market infrastructure; and capacity building. In its first year, a third of the 36 initiatives of the MSME and MTC Roadmap have been implemented.
A key outcome envisaged under the MSME and MTC Roadmap is a targeted MYR 40 billion in total funds raised via the capital market by 2028. This objective is to be achieved through the introduction of new frameworks, market infrastructure, and capacity-building programmes in building a robust pipeline of MSMEs and MTCs into the capital market.
The Malaysia Venture Capital Roadmap 2024–2030, launched in April 2024 by the Ministry of Science, Technology and Innovation (MOSTI) will strategically position Malaysia as an emerging venture capital (VC) hub in Southeast Asia and aimed to elevate Malaysia as a premier destination for VC investments in the region.
The Roadmap seeks to strengthen the nation’s VC ecosystem by setting four (4) key targets, achieved through a comprehensive transformation framework which is built upon three (3) strategic pillars and to be implemented through 11 interventions to address the current challenges.
Aligned with Malaysia’s vision for a vibrant and inclusive innovation-driven economy, the Malaysia Venture Capital Roadmap 2024 – 2030 is built upon three strategic pillars:
Funding: The Roadmap emphasises the strategic allocation of funds contributed by government agencies and private investors, with a focused approach on key sectors critical to Malaysia’s economic development.
Regulatory Reform: It advocates for the establishment of a clear governance structure encompassing policy oversight and development mechanisms to ensure a conducive regulatory environment for venture capital activities.
Capacity Building: The Roadmap seeks to promote the establishment of an inclusive ecosystem that attracts both local and foreign talent, fostering diverse perspectives crucial for sustainable growth and innovation.
The Malaysia Venture Capital Roadmap 2024–2030 with a well-thought-out phased intervention plan, reflects a deep commitment by all parties to evolve the current ecosystem into a more dynamic, efficient, and attractive hub for Venture Capital activity.
References
Central Bank of Malaysia, Annual Report 2024, https://www.bnm.gov.my/publications/ar2024
Economic & Monetary Review 2024, https://www.bnm.gov.my/publications/emr2024
Securities Commission Malaysia (SC), Annual Report 2024, https://www.sc.com.my/annual-report-2024
Catalysing MSME and MTC Access to the Capital Market: 5-Year Roadmap (2024-2028), https://www.sc.com.my/msme-mtc-roadmap
Financial Sector Blueprint 2022-2026, https://www.bnm.gov.my/publications/fsb3
The Malaysia Venture Capital Roadmap 2024–2030, https://www.mystartup.gov.my
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