India, Malaysia share experiences how to support start-up SMEs

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Both Malaysia and India are countries steeped in innovation with a strong desire to foster new, innovative start-up enterprises. 
 
With a global focus on providing more support to Small and Medium Scale Enterprises (SMEs) – and recognizing that start-ups play a crucial role in creating jobs, growth, exports and innovation within most economies  – Asian countries are keen to learn from each other’s experiences. These efforts have taken on a greater priority in India under the leadership of Prime Minister Modi and his “Make in India” and “Start-Up India” campaigns.
 
The World Bank has been supporting India for several years in the area of MSME finance , which is one of the most widely recognized impediments to SMEs, particularly for start-up enterprises.  Through the $500 million MSME Growth Innovation and Inclusive Finance Project, the World Bank supports MSMEs in the service and manufacturing sectors as well as start-up financing for early stage entrepreneurs.  The start-up support under this project ($150 million) is for early stage debt funding (venture debt) which isn’t well evolved. (Unlike India’s market for early stage equity which is considered to already be reasonably well developed.)
 
As part of this project, the World Bank and the Small Industries Development Bank of India (SIDBI), recently held a workshop in Mumbai to allow market participants to learn from one another, and particularly about Malaysia’s successful support for innovative start-up SMEs. The workshop’s participants included banks, venture capital companies, entrepreneurs, fintech companies, seed funders and representatives from the Malaysian Innovation Agency (Agensi Inovasi Malaysia – AIM).

The workshop emphasized the importance of start-ups.  The growing demand for the World Bank to provide financial support to this neglected, but crucially important, segment of the market was underlined by the growing list of early stage equity and early stage debt financing projects that the institution has developed over the past three years in India, Lebanon, Morocco, Jordan, Jamaica.  Several Indian presenters pointed out the increasing awareness of the need to support innovative start-ups – and the evolution of Indian thinking in this regard over the past decade.  Case studies of successful Indian startups were also presented by their founders.
 
The Malaysian Innovation Agency emphasized the innovative aspects of start-ups in Malaysia. CEO of Platcom, Dr. Viraj Perera, explained the role and function of the Malaysian Innovation Agency and Platcom’s National Technology Commercialization Platform, which brings together the Innovation Agency with Malaysia’s SME Agency (SME Corp). Platcom’s objective is to support selected innovative Malaysian SMEs and transform their inventions into innovations by providing “an efficient end-to-end commercialization facilitation platform.”  This is achieved by:

  • Filling gaps when specific market barriers stop good innovations from reaching the market
  • Helping create new businesses and generate economic wealth for Malaysia
  • Speeding up time to market
  • Increasing the competitiveness of Malaysian SMEs through innovation
  • Helping Malaysian SMEs create wealth, impact society, preserve the environment and improve the quality of life
The presentation emphasized the importance of Intellectual Property protection. It also provided several examples of how innovative Malaysian SMEs succeeded in bringing new products to market , and at scale, in the areas of engineering, manufacturing, ICT/MedTech, construction and telecommunications.
 
The Indian audience was impressed with Malaysia’s successful holistic approach to supporting innovative SMEs, while Malaysian counterparts felt that they can learn from India’s novel and important approach to supporting MSMEs. 
 
The hope is that this type of meeting will lead to closer relations and exchanges of ideas and experiences between these two countries.

Photo: © John Isaac / World Bank

Authors

Mihasonirina Andrianaivo

Senior Financial Sector Specialist, World Bank

Simon Bell

Global Lead for SME Finance, Finance & Markets

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