Singapore-based digital financing platform Funding Societies has partnered with CGC Digital, the FinTech subsidiary of Credit Guarantee Corporation Malaysia Berhad (CGC), to support micro, small and medium Eenterprises (MSMEs) via digital supply chain financing guarantee.

The partnership aims to provide digital credit guarantee through a Shariah-compliant digital supply chain financing (DSCF) solution to better address the financing needs of Malaysian micro and small enterprises who are also the most underserved segments, the duo said in a statement on Thursday.

According to the statement, both parties have signed the Memorandum of Understanding (MoU) that showed their commitment to collaborate on a proof of concept (POC) project and innovate products that could enable wider financing access for underserved and unserved MSMEs.

Through the partnership, CGC Digital will develope a new digital credit guarantee product for CGC that will be offered for financing up to MYR 4 million ($880,000) as a start, benefiting up to 100 creditworthy micro and small enterprises via Funding Societies’ industry leading DSCF solutions, leveraging alternative data for MSMEs’ credit risk assessment.

“Following our entry into the small and medium-sized enterprise (SME) portfolio guarantee program of CGC in April this year, we are fortifying this collaboration with CGC Digital,” said Wong Kah Meng, Group Chief Operating Officer, Funding Societies | Modalku.

According to him, the digital-first approach leverages alternative data, enabling MSMEs with broader and more affordable access of MSMEs to digital guarantee and transformative financing.

He noted that CGC Digital’s innovation of CGC’s credit guarantee would mitigate risk for investors and reduce cost of financing for MSMEs.

“Combining it with our industry playbook for fast-moving consumer goods (FMCG), agriculture, telecommunications, and wholesale and retail trade segments, we would be able to serve more micro and small enterprises that make up these industry segments,” he added.

Meanwhile, CGC Digital Chief Executive Officer Yushida Husin said that CGC Digital broke new ground in this collaboration with Funding Societies, as this MoU signifies their mutual dedication to fostering innovation and co-creating value with MSMEs.

“CGC Digital seeks to provide MSMEs with a one-stop digital marketplace for better access to finance and more targeted assistance to scale up,

“Given this, we are committed to collaborating with like-minded strategic partners in the digital ecosystem to accelerate financial inclusion of MSMEs in Malaysia,” she said.

According to the statement, financing for micro and small enterprises remains challenging due to the lack of credit history and the nature of the financing, which is smaller ticket size and higher volume of transactions.

This presents an exciting opportunity for FinTech companies like Funding Societies and CGC Digital to step in and provide the necessary capital and CGC’s innovative credit guarantee features to meet the unique needs of these segments.

By working hand in hand, Funding Societies and CGC Digital can leverage on technology and automation to risk-price more accurately and process financing efficiently, enabling right-priced trade finance products (traditionally reserved for larger businesses) for micro and small enterprises.

The announcement comes on the heels of Funding Societies’ MoU signing with CGC in April for a MYR 10 million ($2.19 million) SME portfolio guarantee scheme focusing on business expansion for small and medium-sized enterprises, and most recently, their launch of a comprehensive Islamic Financing solutions including Shariah-compliant micro, trade, and term financings.

Funding Societies | Modalku is the largest unified SME digital finance platform in Southeast Asia.

It is registered with the Securities Commission Malaysia (SC), as well as licensed in Singapore, Indonesia, and Thailand, and operates in Vietnam.

It is backed by SoftBank Vision Fund 2, SoftBank Ventures Asia, Sequoia Capital India, Alpha JWC Ventures, SMBC Bank, Samsung Ventures, BRI Ventures, Endeavor, SGInnovate, Qualgro, and Golden Gate Ventures amongst others.

The FinTech company provides business financing to SMEs, which are funded by individual and institutional investors.

CGC Digital which was launched in July 2022 aims to advance financial sector digitalization and providing greater access to financing through its digital platform and digital products.

Its vision is to drive MSME’s economic growth through innovative, accessible, and efficient financial digital solutions.

Funding Societies introduces Shariah-compliant Guaranteed Islamic Investment Note in Malaysia