We have also seen a paradigm shift in the approach by financial institutions in the business of SME financing. Increasingly, banks have introduced strategies for interfacing with SME customers, evolving new business cultures for the SME segment and enhancing the financial products and services offered to the SME industry. The share of SME financing has increased from 30% of the total business financing of banking institutions in 1999 to 44% at end-May 2008. In addition, a sustainable and comprehensive Microfinance Institutional Framework was implemented in 2006. Since its implementation, there has been considerable progress in the participation of financial institutions in providing microfinance. Currently, nine financial institutions have launched microfinance products, which has helped to increase access to financing to micro-enterprises. The outstanding micro-financing now amount to RM325 million with more than 31,000 customers. In addition, the financial service providers such as the Credit Guarantee Corporation and Bank Pertanian Malaysia, now known as Agro Bank, have been transformed into institutions that are more effective, efficient and financially sustainable. In relation to this, the SME Credit Bureau, a key initiative under the transformation plan of the CGC has officially commenced operations on 1 July 2008. The Bureau serves as a source of reliable credit information for both the SMEs and their potential financiers. The Bureau will assist SMEs to build a track record and thereby enhance access to financing on more favourable terms, leading to faster decisions on loan applications, and providing a balanced profile of the credit standing of the SMEs.

In facilitating this transition, Bank Negara Malaysia is reducing transaction fees for the RENTAS system (the real time gross settlement system operated by Bank Negara Malaysia) for payments made by financial institutions on behalf of their customers. With effect from 15 July 2008, the RENTAS transaction fee imposed on the member banks will be reduced by RM1.00, from RM2.50 to RM1.50. This reduction in fees will result in a corresponding reduction in bank charges imposed by member banks on their customers for RENTAS payments with effect from the same date. In addition, the banking industry will be reviewing the fee structure for fund transfers to apply a fixed fee instead of the existing Inland Exchange Commission of 0.03%. In this environment, the SMEs also need to initiate their own measures to complement those undertaken by the Government and the banks. Achieving cost efficiency and productivity improvements needs to be a priority for SMEs. SMEs should look at every facet of their business operations to identify ways to streamline processes, eliminate waste, consolidate activities and adopt new technology and energy-efficient processes. SMEs that operate in common geographical locations and that have similar production inputs, should also consider pooling their purchase requirements to benefit from bulk discounts by suppliers, in addition to sharing common costs such as transportation. In this regard, the Chambers of Commerces and industry associations can have a key role. They can facilitate the bulk purchase of raw materials for their members.