Transcript (SMEs): The Malaysian Experience

Focused and Coordinated Development of
Small and Medium Enterprises (SMEs):
The Malaysian Experience
Conference on SME Financing: Issues and Strategies
10 – 11 May 2005
Lahore, Pakistan
Presentation by Mr Marzunisham Omar
Director, SME Special Unit
Central Bank of Malaysia
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Presentation Outline
 SME Development Framework
 Initiatives to Enhance Access to Financing by
SMEs
 Role of SME Special Unit at Bank Negara Malaysia
2
Importance of SMEs
 Thrust of national economic policy
– Strengthen domestic demand
– Promote and diversify endogenous sources of growth
– Infuse dynamism into economic sectors
 SMEs as an impetus for broad-based growth
– Provide linkages between various subsectors
– Source of dynamism and agility
– Indigenous enterprises which may evolve into larger
enterprises
3
Status of SMEs
 Potential for SMEs to contribute more to domestic economy
SME as a % of total
Japan
South Korea
Thailand
Malaysia
Establishments /
Enterprises
99.7%
99.8%
99.7%
92%*
Employment
69.5%
85.6%
68.9%
33.3%*
38.9%
6.0%*
Contribution to GDP
55.3%
49.1%
(Gross Output)
* For Malaysia, based on SMEs in the manufacturing sector only
4
BNM SME Survey
 To assess state of SMEs, their requirements and issues
 8,000 SMEs responded
 Results:
– Low contribution to GDP;
– Domestically oriented;
– Constrained by capacity; level of technology; access to
markets and resources to upgrade skills & production
process; and
– Financing:
• 62% indicated no problems obtaining financing
• Main sources are banks, own capital, and from family and
friends
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Comprehensive and Coordinated
Approach to SME Development
Build enabling
infrastructure
to support
SME
development
Enhance
access to
financing by SMEs
Enhance coordination and
outreach of SME
development
across all
sectors
Internal &
Small &
Inward
Looking
External
Constraints
Low Value Add
& Less
Competitive
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Enhance SME’s
capacity to
compete with
focus on quality,
management & marketing
SME Steering Committee
 Formed in Oct 2002 to drive initiatives to
strengthen infrastructure for SME development
 Inter-Ministry Committee comprising 10 key
Ministries and Agencies involved in SME
development
 Chaired by Governor of Bank Negara Malaysia
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National SME Development Council
 Formed on 13 August 2004:
– Chaired by Prime Minister
– Bank Negara Malaysia appointed as Secretariat
 Objectives:
– Formulate broad policies and strategies;
– Provide direction for comprehensive development of SMEs
across all sectors; and
– Oversee coordination of and ensure effectiveness in policy
implementation
8
National SME Development Council:
Initiatives

Definitions for SMEs in various sectors

Establishment of a comprehensive National SME Database

Enhanced Management and Publication of SME Statistics

Coordinated training and human resource development

Access to financing:
–
–
–
SME Bank
Interest subsidy in place of special funds
Securitisation of SME loans
9
Presentation Outline
 SME Development Framework
 Initiatives to Enhance Access to Financing by
SMEs
 Role of SME Special Unit at Bank Negara Malaysia
10
Initiatives by Bank Negara Malaysia
Credit Guarantee Corporation
Provide guarantee to SMEs lacking collateral and track record
ERF Sdn Bhd
Special purpose vehicle to assist Bumiputera enterprises
SME Special Funds
5 funds with allocation of RM 8.9b (USD 2.3b), i = 3.75% to 5.00 %
Small Debt Resolution Scheme
Provide assistance to viable SMEs constrained with NPLs
11
Banking System: Services for SMEs
SME Units
Bumiputera Development Units
Provision of financing and ancillary services
to SMEs
Address financing and developmental needs
of Bumiputera entrepreneurs
Banking System:
Other Services to Enhance
SME Financing
Display of Client Charter
Complaints Unit
Display a Client Charter on the processing of
loans applications:
Provide a dedicated channel for customers to
raise complaints with banking institutions
– documents & information required;
– eligibility criteria; and
– processing time.
12
Banking System: Main Provider of
Financing to SMEs
 USD8.3 b loans approved to 92,000 SMEs in 2004
– January – March 2005: USD2.1 b loans approved
 USD26.4 b loans disbursed in 2004
 Loans to SMEs accounted for 40% of outstanding business
loans
 2/3 of total loans channeled to 3 main sectors
– Wholesale and retail trade, restaurants and hotels, manufacturing
and construction
 NPLs declined to 12% of total SME loans
13
Development Financial Institutions
and Venture Capital
 Complement role of banks, esp. to finance start-ups
 Development Financial Institutions:
– In 2004, loans extended by 5 DFIs to SMEs amounted to
USD0.8 b
 Venture Capital:
– Several funds established to promote venture capital
industry
– VCCs invested mainly in ICT, pharmaceuticals and
manufacturing
14
Presentation Outline
 SME Development Framework
 Initiatives to Enhance Access to Financing by
SMEs
 Role of SME Special Unit at Bank Negara Malaysia
15
SME Special Unit at
Bank Negara Malaysia

Established to lead BNM’s efforts to support SMEs

Roles:
– Formulate strategies to enhance access to
financing
– Provide information and advisory services to
SMEs
– Secretariat of National SME Development Council
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End of Presentation
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