Lack of financing, tight cash flow among problems faced by SMEs

Lack of financing, tight cash flow among problems faced by SMEs
-A +A

KUALA LUMPUR (Oct 11): Access to financing continues to be a challenge for small and medium enterprises (SMEs) and start-ups due mainly to inadequate cash flow to meet repayment obligations, according to the Ministry of Finance's (MoF) Economic Report 2019/20.

Additionally, SMEs and start-ups are also facing issues with the complex application processes, insufficient collateral and documentation, as well as high risks related to business ventures.

"More than 70% of SMEs' financing needs are sourced internally or from personal savings, and only about 30% is obtained from banks, development finance and microcredit institutions.

"Essentially, the growth and development of SMEs critically depend on their ability to secure finance for business operations and expansion," said MoF.

The report also highlighted that the adoption of technology among SMEs remains low, due to low level of research, inadequate access to the talent pool, and lack of capital for strategic planning and technological utilisation.

In addition, the lack of technology-related content in the school curriculum further hampers the development of talent for future jobs.

In Malaysia, about 98.5% of registered business are SMEs, accounting for 37.1% of gross development product and 66% of total employment, data provided by SME Corporation Malaysia showed.