Aligned with evolving market needs and digital advancements, and in addition to spurring sustainable growth, the capital market continued to expand its role in financing business ventures, creating jobs and driving impactful social change. In this aspect, the SC has facilitated various measures through the provision of innovative capital market initiatives and collaborative endeavours with a broad spectrum of stakeholders.
Catalysing MSME and MTC Access to the Capital Market: 5-Year Roadmap (2024-2028) (MSME and MTC Roadmap)
While MSMEs have traditionally been a key focus of national economic policies, MTCs are seen as a ‘missing middle’. The government’s plans and blueprints for MSME development play a key role in the overall national agenda, this includes the recent Ekonomi MADANI framework, which reinforces the government’s commitment in supporting the transformation of local MSMEs. However, MTCs have not received the equivalent level of attention. A joint study in 2024 by the SC and the Institute for Capital Market Research Malaysia (ICMR)1 states that MTCs are akin to a ‘missing middle’, generally too large to qualify for MSME-targeted government assistance yet lacking the scale and capabilities of the larger listed corporations. However, the MTC segment represents untapped potential, as they are generally well-suited to raise financing from market-based sources.
It was against this backdrop that the SC launched the MSME and MTC Roadmap. The MSME and MTC Roadmap was launched on 23 May 2024 by Senator Datuk Seri Amir Hamzah Azizan, the Minister of Finance II represented by Datuk Johan Mahmood Merican, Secretary General of Treasury. The MSME and MTC Roadmap aims to better position the capital market as an attractive and robust source of financing for MSMEs and MTCs. While MSMEs and MTCs traditionally rely on bank financing, there is much potential for the capital market to play a bigger role, diversifying the funding sources of MSMEs and MTCs while narrowing the financing gap that exists. Furthermore, greater inclusion of firms of all sizes signals a deep and well-diversified capital market, potentially attracting a greater supply of both domestic and foreign capital, and thus positioning Malaysia as a preferred fundraising destination for MSMEs and MTCs in the region.
The target addressable universe of the MSME and MTC Roadmap is approximately 28,000 MSMEs, MTCs and startups with large economic impact and high potential to raise funds in the capital market. Five guiding principles form the underlying foundation for the MSME and MTC Roadmap’s nine crosscutting strategies and 36 initiatives. These are anchored on three key approaches of (1) regulatory and product innovation; (2) market infrastructure; and (3) capacity building. In its first year, a third of the 36 initiatives of the MSME and MTC Roadmap have been implemented.
The MSME and MTC Roadmap is supported by the Ministry of Finance (MOF), Ministry of Investment, Trade and Industry (MITI), Ministry of Economy (MOE), and Ministry of Entrepreneur and Cooperatives Development (MECD). In ensuring a holistic and co-ordinated approach, the MSME and MTC Roadmap is also aligned with various aspects of the national agenda including the Ekonomi MADANI framework, the Twelfth Malaysia Plan (12MP), the New Industrial Master Plan 2030 (NIMP 2030), the National Energy Transition Roadmap (NETR), the Malaysia Venture Capital Roadmap 2024-2030 (MVCR) and the SC’s Capital Market Masterplan 3 (CMP3).
A key outcome envisaged under the MSME and MTC Roadmap is a targeted RM40 billion in total funds raised via the capital market by 2028. This objective is to be achieved through the introduction of new frameworks, market infrastructure, and capacity-building programmes in building a robust pipeline of MSMEs and MTCs into the capital market. The RM40 billion target necessitates a compound annual growth rate (CAGR) of roughly 46%. In 2023 itself, RM6.3 billion was raised through the MSME and MTC capital market channels, i.e. the ACE Market, LEAP Market, VC, PE, ECF and P2P financing.
The success of the MSME and MTC Roadmap will require close collaboration and co-operation among multiple stakeholders, including relevant government ministries, public agencies, and the private sector across the various cross-cutting strategies and initiatives. As of 2024, several collaborations have commenced, including with the MOF’s Government-linked Entities Activation and Reform Programme (GEAR-uP) team, as well as through the inking of MOUs with SME Corporation Malaysia, Khazanah Nasional, and Credit Guarantee Corporation Malaysia. The SC will continue to seek close partnerships with other parties in ensuring the success of the MSME and MTC Roadmap.
The full MSME and MTC Roadmap can be found on the SC website here.
Mitigating Systemic Risks And Promoting Financial Stability
Enhanced Risk Governance Framework
In 2021, the SC-wide risk governance framework was enhanced as part of an overall initiative to have an effective integrated and predictive risk surveillance to maintain regulatory agility.
The structured risk governance framework integrated the wider spectrum of risks such as technology, cyber and conduct risk at the SC’s Systemic Risk Oversight Committee (SROC) and Accounting, Market and Corporate Surveillance Committee (ACMS).
Intensified surveillance
The SC continued to intensify its surveillance of systemic risk to maintain market resilience and stability. Regular SROC engagements were held to deliberate concerns emanating from various segments across the capital market. Domestic equity and bond market, foreign fund flows and trade participation continued to be monitored closely for potential stress points.
In addition, measures and economic stimulus packages introduced by the government to weather the impact of COVID-19, market trading conduct and the financial position of listed companies were among the focus areas for discussion.
Thematic assessments
The SC also conducted thematic assessments covering investors’ fund flows, the position of firms, and policy decisions to ascertain the possible impact on the capital market. In 2021, the SC reviewed and enhanced its crisis indicators on potential emerging risks in the
capital market.
The enhanced crisis indicators provided a reference point for escalation to SROC when the identified indicators and triggers materialised and ensured prompt response to manage and prevent any issues of concern that might lead to a systemic crisis.
Joint regulatory discussions
In 2021, the SC conducted frequent joint regulatory discussions with other authorities such as Bank Negara Malaysia (BNM) and Labuan Financial Services Authority (Labuan FSA) to identify systemic risk concern areas within the financial and capital markets in Malaysia.
Monitoring of various components of the capital market
The SC continued its efforts to undertake a methodological and integrated approach to ensure any potential systemic risk was being monitored, mitigated, or managed. Figure 1 highlights the findings from the following risk assessments on the various components of the capital market.
