and third – the global large infrastructure financing needs. rise of entrepreneurship starting with the first trend on the rise of entrepreneurship – all around the world, we are seeing more small businesses and start - ups being set up accounting for about 90 % of businesses and over 50 % of employment worldwide3. these smes have become key engines of job creation and economic growth in developing countries, particularly following the global financial crisis. with the rise of the digital economy the sme ecosystem is also expanding with increasing number of new technology start - ups. unfortunately, access to financing for smes, especially those in new growth areas, remains severely constrained in many emerging markets. smes form the backbone of the malaysian economy – being more than 95 % of business establishments in malaysia4 ; and being an important driver of employment and growth – 1 / 4 bis central bankers'speeches responsible for an estimated 36 % of the country ’ s gdp ; 65 % of the country ’ s employment ; and nearly 18 % of malaysia ’ s exports5. if we were to look at the financing side, in malaysia, about 60 % of total financing disbursed by islamic banks in 2016 is channelled to household. only about 14 % are to smes6. meanwhile, for conventional banks, sme financing forms a larger portion of their business, accounting for 21 % of total loans. clearly – this represents an untapped market segment for islamic banks to capitalise. i see value - based intermediation or ( vbi ) as one of the drivers for islamic banks to assist smes and those seeking to start and grow business. vbi promotes greater involvement by islamic banks in facilitating entrepreneurial activities through holistic offerings which include financing and proactive support. this forms part of vbi ’ s objectives – that is for islamic financial institutions to conduct a more responsible way of doing business – where growth is to be driven by clear sense of purpose to create positive impact to society ; environment ; and the broader economy. under vbi – business models of islamic banks are expected to become more customer - driven, with greater understanding on customer ’ s specific needs and circumstances. this approach necessitates greater empathy, which can pave the way for islamic banks to develop more tailor made financial solutions. assessment of financial applications would also be based on potential value creation and not on credit scores alone – thus opening up exposure to larger segment of potentially viable businesses. this is central in uncovering new markets, such as within the presently

2016, shariah - compliant trade finance accounted for 24. 1 % of total trade finance provided by the malaysian banking sector. however, our islamic finance industry only financed about 5 % of total exports in malaysia, again, signifying an untapped growth area with large potential. increasing bank financing for smes would also encourage more market based solutions to meet the funding needs of the halal sector participants, which are now largely reliant on government initiatives. there are however a number of challenges that may impede trade finance facilitation by islamic finance players. i would like to highlight two. first is – “ process inefficiencies ” – that can contribute to higher operational risks such as fraud. this can be mitigated through use of technology that reduces reliance on traditionally document - intensive and multi - tiered manual processes. in malaysia, i am happy to note that six islamic banks have embarked on digitalisation of trade finance processes – through an integrated web - based platform that offers trade finance and working capital management solutions. the second challenge is, – the need to improve connectivity between the islamic finance industry and the international trade community – to facilitate effective intermediation of trade finance needs. again, the use of technology can ease the application and submission of trade - related information and documents which can expedite the whole process. if these challenges are not addressed, industry players are at risk of becoming irrelevant in the trade finance space. this is due to increasing competition from fintech companies that are able to serve smes and the underserved market more effectively as compared to a traditional credit intermediating bank. tawreeq, for example, a uae - luxembourg fintech platform, – offers supply chain finance solutions including shariah - compliant trade finance securitisation – to smes and their corporate partners. how do we lessen the risk of being overtaken by such competitors? one way is for the islamic finance industry, to tap into the expertise of fintech companies – by exploring mutually beneficial partnerships – to develop innovative financial solutions for the international business community. in malaysia, the regulatory sandbox is supportive for industry players to explore innovative ideas and test prototype of technology solutions for trade finance. increasing trade flow of halal products – also offers large opportunities for takaful operators to develop innovative solutions for trade - related risks. a good example is trade credit takaful. this however, necessitates the development of requisite expertise within the