KUALA LUMPUR: Malaysian banks are forewarned!
Traditional banks in the country are at risk of losing SME business to non-traditional competitors, according to new insights from RFI Global prepared for California-based data analytics firm FICO.
A total of 57 per cent of Malaysia's SMEs that participated in the FICO survey, expect to take up new or alternative borrowing products in 2022 amid issues with traditional banks such as lack of transparency, information and guidance.
RFI Global prepared the insights for FICO, having examined and analysed two years' worth of polls by SME Banking Council, which gathered the thoughts and feelings of SME owners and operators in Asia Pacific with financial decision-making responsibility for businesses with an annual revenue of up to US$10 million.
Over 4,700 respondents from across the Asia and Oceania regions participated, including 1,044 in Malaysia, 720 in Singapore and 1,036 in New Zealand.
"The (Covid-19) pandemic put a sudden, massive burden on SMEs globally, and they didn't think banks did enough to help them," said Aashish Sharma, senior director of decision management solutions in Asia Pacific for FICO.
"Malaysia's SMEs have made it clear that that they require financial support in 2022 but are less optimistic about getting it from their main banks.
"This is a potentially worrying trend for traditional banks, considering there are an estimated 1.15 million SMEs in Malaysia, employing about 48 per cent of the workforce and contributing just over
38 per cent of the gross domestic product," Sharma added.
If traditional banks were to experience continued and sustainable business growth from the SME segment in the region, they must simplify the application process and improve transparency, as well as customer experience, Sharma said.
The warning comes as Malaysia is still finalising the recipients of five digital banking licences.
Bank Negara Malaysia was supposed to announce the five recipients of digital banking licences in Malaysia end of last month.
However, the central bank's governor Tan Sri Nor Shamsiah Mohd Yunus recently said the announcement would be made upon completion of the legal process.
It was reported that the five recipients were being picked from 29 applications, with several highlighted as the frontrunners for the licences.
They included the joint venture between RHB Bank Bhd and Axiata Group Bhd's Boost, Grab Holdings' joint venture with Singtel, a consortium led by Sunway Bhd, YTL Corp Bhd's bid with Singapore's Sea Group and a consortium comprising Big Pay, Malaysian Industrial Development Finance Bhd and Singapore-based private equity fund manager Ikhlas Capital.
Meanwhile, FICO said an overwhelming majority (70 per cent) of SMEs in Asia Pacific were less than satisfied with access to credit from their main bank.
The top loan decision driver for the SMEs across the board was competitive interest rates, it added.
"Amid strong interest in borrowing funds, between 62-70 per cent of Asia Pacific SMEs are less than satisfied with their main bank's level of support in response to the Covid-19 outbreak. Nearly 60 per cent of Malaysia's SMEs expect to take up new or alternative/non-traditional borrowing products in 2022," FICO said.