Maybank invests in Funding Societies, Boosting MSME financing in Southeast Asia

Malayan Banking Bhd (Maybank) has approved Singapore-based Funding Societies' strategic investment in a digital financing platform for the region's micro, small, and medium companies (MSMEs).

The move comes at a crucial time for the MSME sector, which has been grappling with the economic fallout from the COVID-19 pandemic. Many small businesses have struggled to access traditional financing options, making digital platforms like Funding Societies increasingly important. This investment by Maybank is expected to not only boost Funding Societies' capabilities but also enhance financial inclusion for MSMEs across Southeast Asia.

The strategic investment by Malaysia's largest lender comes after similar investments by state wealth fund Khazanah Nasional and CGC Digital, Credit Guarantee Corp's digital unit, earlier this year. The financial details of Maybank's stake have not been published.

Funding Societies, a financial technology (fintech) company, has granted approximately US$4 billion (RM17.3 billion) in business financing to more than 100,000 MSMEs in Malaysia, Singapore, Indonesia, Thailand, and Vietnam since its inception in 2015.

This impressive track record highlights the growing demand for alternative financing solutions in the region. The platform's success can be attributed to its innovative approach, which leverages technology to streamline the lending process and assess creditworthiness more efficiently than traditional banks. By focusing on underserved MSMEs, Funding Societies has tapped into a vast market that is crucial for economic growth but often overlooked by conventional financial institutions.

Funds from previous investments by Khazanah and CGC were utilized to broaden the platform's presence in Malaysia beyond Kuala Lumpur, Selangor, Penang, and Johor.

The backing by Malaysian government-linked enterprises and prominent venture capitalist funds such as Softbank and Sequoia Capital demonstrates the viability of a business model conceived by two Harvard Business School students a decade ago.

Kelvin Teo of Senai, Johor, and Reynold Wijaya of Indonesia made up the duo. They founded Funding Societies, a Web-based peer-to-peer financing platform for small businesses, in 2015 while obtaining their Master of Business Administration at Harvard.

In an interview, Teo and Reynold stated that they founded Funding Societies and its Indonesian subsidiary Modalku because they recognized tremendous opportunities across Asia, where SME finance is a structural problem. MSMEs, for example, account for 97% of Malaysian business establishments and 38% of the country's GDP.

However, when compared to consumer lending, SME financing is an exceptionally difficult topic with significant local variations. Funding Societies only enter areas where they are passionate and confident that they can succeed, therefore Southeast Asia is an obvious choice, they stated.

The company's focus on Southeast Asia has proven to be a strategic advantage. The region's diverse economies and rapidly growing digital ecosystem provide fertile ground for fintech innovation. Moreover, the cultural and linguistic similarities across countries in the region have allowed Funding Societies to scale its operations more effectively, adapting its model to suit local needs while maintaining a cohesive regional strategy.

It is safe to say that they were successful, as Founding Societies is currently Southeast Asia's largest SME digital finance and debt investment platform. Teo, the group CEO, said of the latest investment: "We are honored by Maybank's support, which reflects a shared commitment to serving MSMEs in Southeast Asia."

This collaboration underscores our commitment to providing lending access to neglected MSMEs that experience cash flow management issues, an area we are gradually expanding to help these enterprises reach their full commercial potential, he said in a statement yesterday.

The investment is part of Maybank's strategy to accelerate innovation by engaging with partners to expand its reach to MSMEs throughout the area. Khairussaleh Ramli, Maybank's president and group CEO, stated that its banking skills, together with Funding Societies' digital platform, would build a strong and sustainable SME environment.

This partnership between a traditional banking giant and a fintech innovator represents a significant shift in the financial services landscape. It signals a recognition by established institutions that collaboration with digital disruptors is essential for staying relevant in an increasingly tech-driven world. For MSMEs, this convergence of traditional banking expertise and cutting-edge fintech solutions promises to create more comprehensive and accessible financial services, potentially transforming the way small businesses operate and grow across Southeast Asia.