1. New Innovative Tools for SME Financing
Datuk Mohd Radzif Mohd Yunus
Group Managing Director,
SME Bank, Malaysia

2. Table of Content Traditional SME Financing and Key Challenges
Rise of Fintech
New Innovative Tools:
The Way Forward
Proposed Method for Adoptions by Financial Institutions
D. Conclusion

3. New Innovative Tools for SME Financing
Traditional SME Financing and Key Challenges
Source: SME Masterplan
Bank lending is the most common source of external finance for many SMEs and entrepreneurs.
Spectrum of funding alternatives available to SMEs is constrained compared with large enterprises.
Fifty percent of formal SMEs don’t have access to formal credit and the financing gap is even larger when micro and informal enterprises are taken into account. (World Bank)
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New Innovative Tools for SME Financing

4. SMEs Issues of Financing SMEs: Financier Vs SMEs FINANCIAL PROVIDER
Want a Fast yet Clean Financing
Lack of Financial Asset
Poor Credit-worthiness
Higher Risk-Return Profile
Lack of Know-How & Resources
Uncertainty over long-term position
Lack of Data for KYC Purposes
SMEs
Lack of Proven Track Record
Lack of Proper Business Plan
Information Asymmetry
High Interest Rate Charged
Risk of High NPLs
FINANCIAL PROVIDER
Financing SMEs also been challenges by the immersion of Gen-Y into the SME Market which comes up with new business model and higher adoption of technology.
Need for new approaches in understanding the Gen-Y immersion and new business model.
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New Innovative Tools for SME Financing

5. Fourth Industrial Revolution New Innovative Tools for SME Financing
Rise of Fintech to address the Present Needs of SMEs
Fourth Industrial Revolution
Characterized by a range of new technologies .
Impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human.
Source: Professor Klaus Schwab, World Economic Forum
Referring to companies that provide or facilitate financial services by using technology.
Financial technology (Fintech) leading the way in disruptive innovation in financial services.
Helping to bridge a $2 trillion funding gap for millions of small and medium-sized enterprises (SMEs).
Rise of Fintech has led to the introduction of solutions that are efficient and effective at lower scale.
What Fintech Offers
Big Data
Financing
Software
Payments
Branding & Marketing
Compliance
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New Innovative Tools for SME Financing
Source: WE Forum: The Future of FinTech, A Paradigm Shift in Small Business Finance

6. Efficient and Effective Operations
New Innovative Tools: The Way Forward
Fintech
FinTech embodies a new set of products tailored to the needs of small businesses.
New tools in term of financing and making the operations more effective and efficient.
Financing
Efficient and Effective Operations
The harvesting of insights from vast quantities of data.
Peer-to-Peer Lending (P2P)
Equity Crowdfunding (ECF)
Practice of lending money to individuals or businesses through online services that match lenders directly with borrowers.
People (i.e. the 'crowd') invest in an early-stage unlisted company (a company that is not listed on a stock market) in exchange for shares in that company.
Small businesses can turn unpaid invoices into fast cash with invoice factoring and invoice financing companies, including online lenders.
Online Invoice Financing (OIF)
Big Data
Software
Payments
Compliance
Business Solution Software, Accounting software, Apps to help SMEs.
Growth in e-commerce has both facilitated and encouraged the further development of digital payments experiences.
Standard checks can be performed automatically and are more reliable than manual checks to extract the most important data needed for AML/KYC .
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New Innovative Tools for SME Financing

7. Tech-Renewal- legal resourcing Issues of Collaboration
Method of Adoptions for FIs to Adopt & Embrace Fintech
Organic Growth (R&D)
Acquisition
For many firms, acquisitions are the only way to obtain a new technology or product and remain a competitive player in the marketplace.
Establishing innovative, agile teams to develop new offerings rapidly, with an emphasis on digital features, such as mobile, social media, and data analytics.
Cybersecurity
Tech-Renewal- legal resourcing
IP Strategy
Data Privacy
Strategy
Issues of Collaboration
Collaboration
Collaborations present a great opportunity for banks not only resulting in increase of revenue, but most importantly innovation
Big data brings big reputational risk, and there is increasing public interest in IT security arrangements.
Issues of who own the Intellectual Property (IP) right after the collaboration.
Roadmap for the integration of data which should include a primary data management system.
Legal resourcing can be a big challenge, given that tech renewal is likely to absorb key people in the business for a very long time
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New Innovative Tools for SME Financing

8. As a conclusion…
The free lunch is over: FIs must leverage Fintech
New untapped technology is rewriting the FIs rulebook
Time to get off bench: Over 20% of FIs business at risk to Fintech
Disintermediation: FinTech’s most powerful weapon
Where traditional FIs have failed, Fintech is succeeding
Fintech is shaping Financial Institutions (FIs) from outside in
15 February 2017
New Innovative Tools for SME Financing