The Credit Guarantee Corporation is a key institutional arrangement in facilitating greater access to financing by the SMEs. By providing guarantee to loans obtained by SMEs, CGC addresses one of the main constraints of SMEs that is the lack of collateral. Bank Negara Malaysia, as the largest shareholder of CGC, is committed to ensure that CGC is in a position to have an effective role. Towards achieving this, RM1 billion was injected into CGC in 2000 to enhance its financial capacity to provide guarantees. In 2005, a process to transform CGC was initiated to enhance its role and to expand its range of products and services offered. The aim is to position CGC as not only a provider of credit guarantees, but as an important institution that enhances the ability of SMEs to obtain financing from the financial institutions, in particular, through the provision of wider credit enhancement products, advisory services on financial and business development and credit information services. In 2006, CGC has shown commendable progress in this transformation process. Indeed, the strategic partnership that is being entered today between CGC and Islamic financial institutions is part of the initiative for CGC to expand the outreach of its products. This strategic partnership between CGC and Islamic financial institutions is an important milestone as it brings together the two important objectives of the Government, namely enhancing SMEs' access to financing and promoting the growth of Islamic finance. Islamic finance has now not only experienced significant growth but is becoming more internationally integrated.

To date, more than 14,000 SMEs have registered in the SME Business Directory of the Portal. In strengthening the financial infrastructure for SMEs, Bank Negara Malaysia has also established the Small Debt Resolution Scheme where viable SMEs that are constrained by non-performing loans are assisted through loan restructuring and the provision of additional funding. In addition, through EXIM Bank, two new trade financing products for SMEs have been introduced in 2006. The Census that was completed in 2005 had however, indicated that about 80% of SMEs are micro enterprises which had limited access to financing from the formal financial system to maintain and expand their businesses. To meet the financing needs of this key segment of the SMEs, microfinancing has now been established in our financial system. A number of financial institutions are participating in providing fast, flexible and convenient access to financing to individuals and micro enterprises for their business activities. The various measures that have been undertaken have now already yielded positive results. SMEs today have had greater access to financing, with the banking institutions being the main source of financing. In 2006, RM40 billion in new loans was approved to more than 84,000 SME accounts. Of this, the Islamic banking institutions provided RM5 billion in new financing, compared with RM3 billion in 2005. The share of SME loans of the banking institutions has increased from 30% of total business loans at end-1999 to 45% at end-2006. Total SME outstanding loans of the banking institutions have now breached the RM100 billion level in 2006.