Zeti Akhtar Aziz: Grow your business - access to financing for SMEs in
Malaysia
Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the
book launch of "Grow your business: access to financing for SMEs in Malaysia", Kuala
Lumpur, 27 August 2013.
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It is my pleasure to be here this morning for the launch of the SME financing guide book
"Grow Your Business: Access to Financing for SMEs in Malaysia". Significant attention has
been given to SME development in view of its relative importance in our economy, in terms
of its role in generating growth and employment. SMEs are an important agent of growth and
will be a vital component that will support our nation's aspirations to transition to become a
high income economy. SMEs have become a formidable force in the economy, accounting
for 97% of established businesses and employing 57% of the nation's workforce. The SME
contribution to GDP is now 33% and is projected to increase to 41% by 2020 as envisaged in
the SME Master Plan that has been endorsed by National SME Development Council.
As the economy becomes more sophisticated, so will the requirements of the SMEs. One of
the major levers of growth for the SME sector is access to financing. Financial institutions
therefore have an important role in the ecosystem for financing to SMEs. In the current
environment, financial institutions provide 89% of the total SME financing.
The SME financing guide book being launched today is initiated by the Institute of Bankers
Malaysia to provide detailed guidance to assist SMEs in their applications for financing from
financial institutions. It also provides information on the factors that are taken into
consideration by financial institutions in approving the applications. In addition, it elaborates
on the responsibility of borrowers, and the redress mechanisms that are available.
Irrespective of sectors, SMEs should adopt best practices in financial management to ensure
their business will remain sustainable. Managing costs will also enhance the performance
and competitiveness of the business in both domestic and global markets. SMEs should
therefore actively draw on the wide range of products and services including advisory
services offered for every stage of its business cycle, whether it is a start-up, growing or a
matured business. The expertise, extensive network and the broad range of services and
products which are in place should be leveraged upon by the SMEs.
Recognising the importance of SMEs in contributing to the socioeconomic development of
the country, the Government has introduced various programmes to assist SMEs through its
Ministries and agencies. The infrastructure to support access to SME financing has also
vastly improved compared to a decade ago. In 2012, a total of RM217.2 billion in financing
has been disbursed to SMEs through the banking system, compared to only RM87.1 billion
in 2003. This year, 155 SME development programmes with an allocation of RM18.4 billion
have been developed and which is being channeled through government agencies and the
private sector.
To enhance the enabling infrastructure for SME financing, the Credit Bureau Malaysia was
established in 2008 to provide comprehensive and credible credit information and ratings for
SMEs in Malaysia. More than 1.1 million credit reports have now been generated by Credit
Bureau Malaysia to facilitate access to financing for businesses since its inception. In
addition, SMEs with limited collateral or track record are able to benefit from the credit
guarantee facility provided by Credit Guarantee Corporation that extends its services to
include advisory.
In efforts to ensure simple, efficient and prompt application process, Bank Negara Malaysia
and the Association of Banks in Malaysia (ABM) introduced PARTNER 1, a simplified
application form and documentation checklist which has now been adopted by 8 domestic
banking institutions. This initiative has been enhanced in PARTNER 2, in which reasons are
provided for loan applications that have not been successful. This is to provide to the SMEs
the opportunity to address the weaknesses or limitation thereby enhancing their potential to
gain access for financing.
In addition, SMEs facing challenges in their business operations, may now seek assistance
from the various agencies namely the SME Corporation's One Referral Centre and the Bank
Negara Malaysia's Small Debt Resolution Scheme (SDRS) when confronted with financial
stress. Under the Small Debt Resolution Scheme, a total of 894 SMEs have now been
assisted since its establishment in 2005. Addressing the problems and challenges at an
earlier stage will contain the deterioration, and will enhance the prospect for a positive
solution.
As our economy evolves and transitions towards higher value added activities, the financial
support services that is being provided by the financial institutions also needs to evolve.
Financial institutions have to recognise that SMEs will increasingly become specialised and
diversified, and will require a much more customised and differentiated financial services.
Financial institutions will also need to broaden their dimension to look beyond the traditional
business activities and be positioned be able to provide financial services to businesses in
new areas of growth such as green technology, medical sciences, and information
technology. Today, the true value of companies is also not just measured by their tangible
assets, but also includes their intellectual capital. The adoption of more dynamic
methodologies to assess the businesses value should therefore be beyond collateral and
historical performance. For this, financial institutions have to continuously be ahead of
innovation and the new growth areas to be able to take into consideration the new related
risks in their assessment.
Technology will also have a vital role to support efficient services and greater outreach.
Financial institutions should also encourage technological enhancements by SMEs through
the provision of financing, including adoption of end-to-end supply chain management
solutions and greater expansion into regional production networks.
On this note, let me take this opportunity to congratulate Institute of Bankers Malaysia for the
launch of this book. I applaud the initiative undertaken. It would definitely be an important
reference for the SMEs.