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Kuala Lumpur: A better solution is needed to close the funding gap for small and medium-sized enterprises (SMEs), says Bank Negara Malaysia deputy governor Jessica Chew.

She said delivering an effective SME financing strategy would require enhancing the traditional role of banks and financing – while recognising the limitations, particularly at earlier stages of the life-cycle for new and innovative firms.

“There is still considerable room to further evolve the role of banks, particularly in the area of enabling lending decisions based on alternative data, along with supporting longer-tenure and flexible financing solutions,” she said at the Malaysian SME national conference here.

She said other key areas involved developing and deepening alternative sources of financing to complement the banks, while strengthening firm-level factors such as resources, structure, organisational culture and board character.

Significant strides, she said, had been made in these areas with programmes such as iTekad, which provides seed capital and microfinancing to micro entrepreneurs.

Chew said institutions such as the Credit Guarantee Corporation had also introduced portfolio guarantees to provide credit enhancements, and greater speed and scale for borrowers who did not have collateral or a track record.

“The introduction of digital banks and alternative fundraising platforms such as crowdfunding and peer-to-peer lending platforms, with their diverse business models and innovative credit assessments, will contribute to the expansion and diversification of funding sources for SMEs,” she said.