Malaysia's development banks told to plug lending gap for MSMEs

Productive sectors need more capital to stimulate the slowing economy.

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Malaysia's development banks should step up loans to small businesses in the face of a global trade war that puts economic growth, jobs, and wages at risk, experts said.

These loans will come in handy as private banks turn cautious during the “economic turmoil,” according to Mohd Prasad Hanif, secretary general of the Association of Development Finance Institutions Malaysia (ADFIM).

"Most private commercial entities will be reluctant to lend out [to these sectors]," he told the Asian Banking & Finance and Insurance Asia Summit Malaysia 2025 in Kuala Lumpur. "This riskier segment will still have to pay back the financing."

S&P Global Ratings has cut its growth forecast for Malaysia by 40 basis points to 4.5%, citing a weaker outlook on global trade and higher US tariffs on semiconductors.

Growth slowed to 4.4% in the first quarter from 5% a quarter earlier.

Main challenge

Development banks are mandated to extend financing to micro, small, and medium enterprises (MSME) and productive sectors such as agriculture and exporters.