AccesstofundingstillamajorconcernAccesstofinancingremainsaperennialproblemforsmall

andmediumenterprises(SMEs)despitethevariousinitiativesspearheadedbythegovernmentandtheprivatesectortoaddressthegapinthemarket.

SmallMediumEnterpriseDevelopmentBankMalaysiaBhd(SMEBank)groupmanagingdirectorDatukMohd

RadzifMohdYunus,whospokeatTheEdgeSMEForum2015,saidthatevenwiththeincreaseingovernmentfundingandmultipleavenuestoapplyforfinancing,SMEsarestillbeleagueredwithpoorcreditworthinessandinsufficientknowledgeofwhatisavailableoutthereintermsoffunding.

Thereisaproliferationofloans,grants,guaranteeschemes,venturecapitalopportunitiesandgovernmentloanschemesfortargetedsectors,butfromtheperspectiveofSMEowners,accessibilitytoinstitutionalfundingremainsoneofthemajorgrouses.

MohdRadzifsaidSMEsfoundtheloanapprovalprocesstootediousandthatittooktoolongfortheloanstobedisbursedaftertheyhadbeenapproved.Butthiswasnottheonlyissue,headded,pointingoutthattherewereoftenshortcomingsintheapplicationssubmittedbytheSMEsthemselves.

CitingasurveyundertakenbySMECorpMalaysiain2014,hesaid42%oftherespondentsindicatedthattheywereseekingnewandadditionalexternalfundingtogrowtheirbusiness.While94%hadbeensuccessfulingettingfinancing,theothersfailedduetoinsufficientdocumentation(31.7%),highleverageoroutstandingloans(31.7%),orinsufficientsales,incomeorcashflow(55.2%).Attributingtheshortcomingstoalackoffinancialliteracyand

properadministration,MohdRadzifsaidtheSMEsthatusuallystrugglewiththeseareinthe"underservedmarket"theybarelyhaveproperfinancialrecordsandarenotcapableofmaintainingasoundaccountingsystem.

Insomecases,theSMEslackproperplanningandstruggletobudgettheiroperations,headded.Thismakesthefinancingapprovalprocessmorecomplicated.

SMEFINANCINGHIGHERTHANEVER

Ontheflipside,lendersarebeingpressuredasaresultofthehighcostsinvolvedinassessingloans,MohdRadzifsaid.Thisisthenreflectedinhigherbaseinterestratesandthelackof"lendingtechnologyinfrastructure".

"Thereisn'taplatformwithcollateddata,suchasanSMEdatabase,tomakeiteasiertoevaluatebusinessproposals,"headded.

Nevertheless,SMElendinghasneverbeenhigher."SMEfinancinggrew13.2%fromRM199.6billionatend2013toRM225.9billioninDecember2014,involving693,115SMEaccounts,"MohdRadzifnoted.

Accordingtothedataprovided,financingforthemicro,smallandmediumenterprisesectorstoodatRM240.5billionasatMarch,a16.3%increasefromayearearlier.Theloansweredisbursedthroughcommercialbanks,developmentfinancialinstitutions(DFI)andaplethoraofgovernmententitiesandstatebackedagencies.

Lastyear,therewere133programmesthatbenefitedSMEs,withafinancialcommitmentofalmostRM7million,targetedat484,000SMEs.Threeoftheprogrammeswererelatedtointellectualproperty.

Financingrejectionrateshavedecreasedgraduallysince2011,when16.8%oftheapplicationswereturneddown."Theoverallrejectionrateforfinancialinstitutionsisfallingandcurrentlystandsat14.4%,"saidMohdRadzif.MM

TheapplicationswererejectedmostlybecausethefinancialinstitutionsweredoubtfulthattheSMEscouldservicetheirrepaymentsasthebusinesseshadpoorcashflowandnegativefinancialprojections.Nevertheless,governmentcommitmenttoboostthesectorhasneverbeengreater,MohdRadzifsaid.

"Youcanseethegovernment'sinterestinhavingSMEscontributetothenationaleconomyandinensuringthesustainabilityoftheeconomy."

Headline Access to funding still a major concernMediaTitle The EdgeDate 08 Jun 2015 Color Full ColorSection Supplement Circulation 22,244Page No S5 Readership 66,732Language English ArticleSize 647 cmJournalist N/A AdValue RM 11,140Frequency Weekly PR Value RM 33,420

WORKINGTOCLOSETHEGAP

Inaddressingthegapintheunderservedmarket,MohdRadzifsaidSMEBankhasbeenhelpingSMEstobemorebankablethroughprogrammesconductedbytheCentreforEntrepreneurDevelopmentandResearch(Cedar)."Thisisdoneviaprogrammestotrainandupscaletheentrepreneurs.ThecentrealsopublishesbooksonSMEs,andwehavedonecasestudiestohelptheSMEs."

HealsosaidSMEBankwillbecomingoutwithafinancingprogrammetohelpstartupsandsmallenterpriseswithoutcollateralandthosethathavenotbeenableto

putaproperaccountingsystem

inplace.Theprogrammeisslatedtobelaunchedthisyear.MohdRadzifsaidhebelievessuchengagementandprogrammeswillenlighten

businessesontheimportanceofmaintainingtheirbooksproperly,suchashavingfinancialstatementsthatreflectthehealthofthecompanyovertheyearsaswellasitsdirection.

HewasrespondingtoKongLingLoong,chairmanofsmallandmediumenterprisesandhumanresourcesdevelopmentcommitteeattheAssociatedChineseChambersofCommerce&IndustryofMalaysia(ACCCIM),whoquizzedtheformeronthemeasuresundertakenbySMEBanktoassistnewlyestablishedSMEswithapotentialtogrow,butwithoutaproventrackrecord.

ReferringtoasurveyundertakenbyACCCIMinthelastfewyears,KongsaidSMEsthathadatrackrecordofbetween5and10yearsdidnotfacemajorhurdlesinsecuringbankloans,butthosewithlessthanthreeyearsundertheirbeltsdid."ThishasledtoacyclewhereSMEsthathavebeenaroundlongercontinuetogethelp,whilethosethathavethepotentialbutdon'thaveatrackrecordalwaysfail."

MohdRadzifsaidSMEBank,whichrespondstotheunderservedmarket,isawareofthefrustration."We[SMEBank]needalittlebitofunderstanding.[TheyoungSMEs']businessesarenotperfect,sowerequiremoretimetoassesstheircapabilities."

HeaddedthatSMEBankhasitsownsetofrestrictions.

Whilepromisingbusinessessuchasthoseinthehightechindustryareencouraged,DFIssuchasSMEBankareonlyabletoapproveanddisbursefinancialaidtothosewithcollateralandatrackrecord.

"Nodoubttherearemanybusinessideasthatcometous,andwewillseeiftheycanbeconvertedintosomethingcommerciallyviable.Butwewillnotprovidefinancingtoanideawithoutcollateral.Thisisbecausethereisa

needforcommitment[onthepartoftheentrepreneur],"MohdRadzifsaid.

However,SMEBankwillrefersuchbusinessestootheragenciessuchasMalaysiaVentureCapitalManagementBhd,whichfocusesonfundingstartupsinthefieldofinformationtechnology.ByPathmaSubramaniamandKuekSerKwangZheQ

INodoubttherearemanybusinessideasthatcometo

us,andwewillseeiftheycanbeconvertedintosomethingcommerciallyviable.Butwewillnotprovidefinancingto

anideawithoutcollateral,Thisisbecausethereisaneedfor

commitment[onthepartofthe

entrepreneur],>MohdRadzif

Headline Access to funding still a major concernMediaTitle The EdgeDate 08 Jun 2015 Color Full ColorSection Supplement Circulation 22,244Page No S5 Readership 66,732Language English ArticleSize 647 cmJournalist N/A AdValue RM 11,140Frequency Weekly PR Value RM 33,420

SMEfinancingsupplygap

RM4050bilfinancingnotaddressed...Workingcapitalandexpansionbycommercialbankstodayneedsrepresent80%of

financingsupplygapSMEfinancingrequired

100%RM170180bilRM1015bil

80mug'"^11

\uWUHfl

40^Hi^H

.

mm20102010

SOURCE:BNM,SMEBANKPRIMARYMARKETRESEARCHSURVEY(N=300)

Reasonsforloanrejection

repayment\isdoubtfulI

Doesnotcomply/Notinaccordancetojno/lguideline^U/o

Weakjustificationfor|HHq,