5 Key Budget 2023 Highlights Impacting Fintech in Malaysia

5 Key Budget 2023 Highlights Impacting Fintech in Malaysia

by March 1, 2023

The revised Budget 2023, with a theme of ‘Developing Malaysia Madani’ was officially presented last week by Prime Minister Datuk Seri Anwar Ibrahim.

The comprehensive budget spanned a wide range of determinations for Malaysia in 2023, with an allocation of RM388.1 billion to be spread out over 12 key thrusts, as Malaysia recovers from the prolonged aftereffects of the COVID-19 pandemic, a tumultuous economic climate, and a need to rebuild certain sectors and institutions in an effort to boost the confidence of the populace and investors alike.

Malaysia’s economy is expected to expand by 4% this year, but Fitch Solutions Country Risk and Industry Research maintains that risk factors including fading demand, tightening credit conditions, and a weakening global outlook could result in GDP growth slowing to 4% from the 8.7% experienced in 2022.

The Malaysian Budget 2023 contains several initiatives that can enhance Malaysian fintech businesses and sustainability efforts, including those related to and operating within the fintech space. Here are some of the key measures and their potential impacts:

Boosting digital adoption across industries, MSMEs

The government has allocated RM1.2 billion to accelerate digitalisation efforts among MSMEs. This includes providing financial assistance for digitalisation, such as subsidies for e-commerce platforms and digital marketing initiatives. This will help Malaysian businesses, including those in the fintech sector, to reach a wider audience and expand their operational base.

RM100 million will be distributed under the Digitisation Grant Scheme to spur business modernisation for small businesses with matching grants of up to RM5,000 per company for automation and digital tools. Bank Negara Malaysia (BNM) will separately incentivise SMEs with a RM1 billion facility for process automation and operational digitalisation such as adopting accounting and inventory management software that could be provided by fintech startups that are based either locally or globally.

Budget 2023 supporting fintech startups in Malaysia

An additional RM40 million will be allocated to the Malaysia Co-Investment Fund (MYCIF) to further enhance the liquidity of equity crowdfunding (ECF) and peer-to-peer (P2P) markets, and enabling opportunities for better price discovery. According to the Securities Commission (SC), this will bring the total available accumulated funds to RM300 million under MYCIF, which has been instrumental in securing financing for both MSMEs and startups including fintechs. 

This will provide much-needed support for these companies, which often struggle to secure funding from traditional sources. The funding can be used for research and development, commercialisation, and market expansion.

Beyond that, the government will look to encourage the listing of high-growth tech startups with the issuance of dual-class shares, which can permit investors to access more diversified investment opportunities.

Similarly, the government will allow tax deductions up to RM1.5 million on the listing expenses for high-growth technology companies who want to list on the ACE and LEAP Markets, as well as the Main Bursa Malaysia Market. Likewise, the aim here is to generate trading interest in these firms “by allowing investors to capitalise on these companies’ growth potential”, as per the SC.

Oversight for BNPL with the Consumer Credit Act

PM Anwar, who is also Malaysia’s Finance Minister, mentioned in his Budget 2023 speech that new regulations in the form of the Consumer Credit Act and Consumer Credit Oversight Board (CCOB) were being established to monitor credit services including the ‘buy now, pay later’ products that have proven popular with Malaysian consumers.

However, authorities such as BNM have cautioned users of such services against overspending as a result of these services’ convenient instalment and zero-interest rate models, with concerns about other charges involved such as late fees and processing fees.

The BNM, the Ministry of Finance, and the Securities Commission have been spearheading inter-agency efforts since mid-2022 to enact the Consumer Credit Act and the establishment of the CCOB by “this year”, according to Anwar.

Under the ePemula income relief programme, users who fall into the M40 bracket and earn below RM100,00 will receive one-off RM100 credit into their designated e-wallet. Youths aged between 18-20 will benefit from Enhanced ePemula, with a one-off credit disbursement of RM200.

Cracking down on fraud

The Prime Minister also highlighted the RM10 million allocated to the National Scam Response Centre to combat rising fraud in the country, which cost affected parties RM850 million in 2022.

The revised Budget 2023 that was tabled brought up the new requirement for banks in Malaysia to activate a ‘kill switch’ to enable account holders to freeze their accounts when suspicious activity is detected. Banks are already rolling out the feature nationally, with major banks like Maybank and CIMB already introducing the feature in their mobile banking apps.

Promoting sustainable finance

The 2023 budget also includes measures to promote sustainable finance in Malaysia, including tax incentives for green investments and a RM3 billion allocation for the Green Technology Financing Scheme (GTFS) until 2025. 

This will encourage businesses to invest in sustainable initiatives, such as renewable energy, waste management, and eco-friendly products and services. MSMEs contribute 36% to the Malaysian GDP, but often face difficulties accessing green finance, so fintech companies can play a key role in facilitating these investments by providing platforms for green financing and investing.

Together with other tax relief, the government also unveiled tax deductions for the costs of issuing sustainable and responsible (SRI)-linked sukuk — Islamic bonds that have been approved, permitted, or deposited with the SC for at least five years. The SC points out that this shows the country’s commitment to a more sustainable economy, by mobilising funds towards incentives that “provide more positive impacts to society”.

All in all, the Malaysian Budget 2023 contains several initiatives that can enhance Malaysian businesses and sustainability efforts, including those related to fintech. By encouraging digital adoption, supporting fintech startups, promoting sustainable finance, and enhancing fraud prevention, the budget can help to nurture a more vibrant and inclusive economy that benefits all strata of Malaysian society.