THE Malaysian Micro Business Association (MAMBA) has called on both the government and financial ecosystem players to expand access to fund factoring and invoice financing solutions.
This call aims to protect the cashflow of micro, small, and medium enterprises (MSMEs) amid an increasingly challenging global economic environment.
As it is, liquidity constraints have emerged as a primary barrier that hinders growth among Malaysian MSMEs, according to MAMBA secretary-general Alvin Low Wei Yan.
This is particularly acute for those in sectors where long credit terms and delayed payments are standard practice. Micro-businesses and small enterprises often deliver products and services upfront but only receive payment 60 to 120 days later.
“This significant waiting period creates immense strain, making it difficult to cover operational costs like salaries, replenish inventory or seize new business opportunities,” observed Low.
“Factoring provides immediate access to earned revenue, bridging this critical cash flow gap. For many, this can be the determining factor between sustaining operations and facing closure.”
Editor’s Note: Fund factoring or invoice factoring is a financial service where a business sells its unpaid invoices (accounts receivable) to a factoring company at a discount for immediate cash. The factoring company pays the business an advance, typically 70-90% of the invoice value and then collects the full payment from the customer later.
This is a way for companies to improve their cash flow without taking on debt as the factoring company assumes the responsibility for invoice collection.
Missed opportunities
Recent industry data underscores the severity of this issue. According to a 2025 report from Experian Malaysia, the average payment delay for SMEs is 64 days with the gap widening to as much as 26 days between SMEs and their corporate clients in sectors like transport and logistics.
“These persistent cash flow strains are a leading cause of business failure,” lamented Low.
While Malaysia has made progress in micro-financing, Low nevertheless noted that the awareness and adoption of factoring services remain critically low, especially among micro-entrepreneurs and suppliers to large corporations and government-linked companies (GLCs).
This represents a significant missed opportunity as the MSME sector is a cornerstone of the Malaysian economy.
“Malaysia’s MSMEs contribute over 38% to the national GDP and employ more than seven million people. Their ability to not just survive but to scale directly impacts national economic stability and growth,” stressed Low.
“The current MSME funding gap in Malaysia is estimated to be US$21.5 bil (RM90.30 bil), according to a 2024 data from the SME Finance Forum. Factoring is a powerful and under-utilised tool to address this gap.”
Factoring also presents a compelling opportunity for investors, offering a resilient and performance-based asset class. Unlike traditional lending which relies on collateral and credit history, factoring is secured against the value of a business’s accounts receivable.
This model unlocks working capital based on real business performance.
Advantages of factoring
“By improving cash flow, MSMEs can build resilience, retain talent, invest in technology and take on larger contracts, hence driving sustainable growth,” Low explained.
“For investors, factoring is a viable and resilient asset class as it translates into a secure, short-term and self-liquidating investment that supports the real economy.”
The potential for growth in this sector is substantial. The Southeast Asia factoring market which was valued at US$140.7 bil (RM590.94 bil) in 2024 is projected to grow at a CAGR (compound annual growth rate) of 7.1% to reach US$279.4 bil (RM1.17 tril) by 2033, according to IMARC Group’s South East Asia Factoring Market Report.
In Malaysia, however, only an estimated 3% of market receivables are currently captured by the factoring industry, a fact that highlights a significant opportunity for expansion to cite AFS Alliance’s Factoring Market Research.
On this note, MAMBA is calling for a stronger multi-stakeholder collaboration involving the Finance Ministry, Bank Negara Malaysia (BNM), financial institutions, alternative financiers and major supply chain leaders to expand access to factoring solutions for micro and small businesses.
This includes promoting fair payment terms across supply chains, introducing education and outreach initiatives to increase awareness of factoring as a viable financing tool and asset class, and encouraging digital platforms that can streamline invoice verification and accelerate financing approvals.
“Cash flow is the lifeline of every MSME,” asserted Low.
“Enhancing access to factoring is not just a form of financial support but a strategic investment in Malaysia’s grassroots economy to foster entrepreneurship, securing jobs and unlocking a stable and profitable asset class for the investment community.” – Oct 28, 2025
