KUALA LUMPUR (Feb 5): Malaysian small and medium enterprises (SMEs) continue facing issues of accessing capital and coping with rising compliance costs due to still insufficient government initiatives, an industry representative said on Thursday. 

Stronger policy support and more effective financing mechanisms are required to help businesses move up the value chain and expand into export markets, said Associated Chinese Chambers of Commerce and Industry of Malaysia treasurer-general Datuk Koong Lin Loong. 

“While there are grants and incentives, tax incentives alone are not sufficient to drive investment,” he said. “Many SMEs need upfront capital, especially if they want to expand overseas or automate their operations.”

Koong was speaking as one of the panellists during the “Trade and Investment Strategies for Diversification and Global Market Expansion” session at the Malaysia Economic Forum 2026.

His remarks also come at a time when Malaysian SMEs face challenges related to digitalisation, licensing requirements and regulatory compliance, which raise operating costs and limit their ability to scale.

Koong noted that in recent years, some SMEs have turned to initial public offerings (IPOs) as an alternative source of funding, describing this as a positive development for Bursa Malaysia. However, he cautioned that IPOs are not a viable option for most SMEs, particularly those without sufficient scale.

“For bank financing, SMEs often apply to multiple banks at the same time, hoping that at least one will approve their loan,” he said, adding that government funds and guarantees remain limited relative to demand with “too many SMEs chasing too little funding”. 

SMEs play an outsized role in Malaysia’s economy, accounting for the bulk of employment and business activity. 

Bank loans remain the most critical, but rising financing costs have become a major burden, Koong flagged.

“Many SMEs take loans to automate and improve productivity, but once they do so, some end up operating under capacity,” he said. “In many cases, a significant portion of their profits goes towards servicing interest payments, leaving very thin — or what I would call ‘nano’ — profit margins.”

SMEs, of which only about 18% are involved in global trade, also often find themselves “stuck in between” as they are neither large enough to compete globally nor small enough to remain insulated from rising costs and competition, Koong added.

Read also:
Long-awaited Residential Tenancy Act to be tabled this year — minister