access to credit: reforms, benefits and challenges...

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2012/SOM1/EC/WKSP/011 Session 4

Access to Credit: Reforms, Benefits and Challenges – Malaysia’s Experience

Submitted by: Association of Banks in Malaysia

APEC Ease of Doing Business 2012 Stocktake Workshop

Moscow, Russia12-13 February 2012

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ACCESS TO CREDIT: REFORMS, BENEFITS AND CHALLENGES – MALAYSIA’S

EXPERIENCE

Presented byChuah Mei Lin

The Association of Banks in Malaysia

APEC Ease of Doing Business Stocktake Workshop 2012Moscow, Russia

Sunday, 12 February 2012

Table of Contents

1. Malaysia’s Global Rankings• World Bank’s “Ease of Doing Business” Report• Access to Credit – Global Competitiveness ReportAccess to Credit Global Competitiveness Report

2. Importance of Small and Medium Enterprises (SMEs)• Definition of SMEs• Contribution of SMEs to Malaysia’s economy• Banks as main source of external financing

3. Supporting the SMEs

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• A Holistic Framework - Reforms and Initiatives• Moving Forward: Funding Available

4. Benefits and Challenges – How SMEs can better helpthemselves

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World Bank’s “Ease of Doing Business” Report –Malaysia’s Standing

Indicator Ranking 2012

Ranking 2007

Improvement (i t h )2012 2007 (in notches)

Overall Ranking * 18 25 7

Starting a Business 50 71 21

Getting Credit 1 3 2

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* Out of 183 countries

Access to Credit: Malaysia’s Global Rankings

“G tti C dit” f 2009 2010 d• “Getting Credit” for 2009, 2010 and2011 – World Bank’s Doing BusinessReports

Ranked No 1

• “Ease of Access to Loans” in TheWorld Economic Forum (The GlobalCompetitiveness Reports 2010-2011

Ranked No 8 (Year 2011)

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p pand 2011-2012)

)

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Definition of Small and Medium Enterprises (SMEs)

The definition of SMEs in Malaysia:-

Manufacturing and manufacturing-related

services (MRS)

Annual Sales Turnover < RM25 million Or

Primary Agriculture, Services, Construction & Mining

Annual Sales Turnover < RM5 million Or

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No. of full time employees < 150

No. of full time employees < 50

Contribution of SMEs to the EconomyAs at Year 2010 Forecast for Year 2020

(based on SME Masterplan)

GDP 31.9% 41%

Representing 99% of total establishments, SMEs areimportant agents of growth of Malaysia’s economy

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% to Total Establishments

GDP 31.9% 41%

Exports 19% 25%

Employments 59% 62%

SMEs by SectorAgriculture,

6.2% (mainly in plantation & Manufacturing,7 2% (mainly in

Source: SME Corporation Malaysia and Department of Statistics, Malaysia

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78

18 Micro

Small

Medium

Large

( y phorticulture)

Services,86.6% (mainly in retail)

7.2% (mainly in textiles & F&B)

548,267

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Financing Outstanding as at end-Aug 2011 RM billion

BIs142.4

Agriculture (5%) Others

(5%)

Construction (12%)

SMEs across all sectors rely on banks as the main source of external financing

SMEs in all economic sectors have access to financing

Factoring and Leasing 20.1

DFIs13.3

Government Funds and Schemes 119.1

Venture Capital 23.4

1/ At end-Jun 2011

( %)

Manufacturing (22%)

Services (57%)

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Source: Bank Negara Malaysia, SME Corp Malaysia and Securities Commission

2/ At end-2010

• 87% of total SME financing are from banks

• Banks have 558,586 SME accounts

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Approval rate remained high at 81%(%)

• In Jan-Aug 2011, financing approvalsgrew by 23.7%, amounting to RM47.9

SMEs continuously have access to financing

TitleMeasure

81.3

66.4

50

75

2003 2004 2005 2006 2007 2008 2009 2010 Jan-Aug

SMEs

All customers

g y gbillion for 82,087 accounts

• SMEs accounted for 40% of totalbusiness financing (CAGR since2000: 6.8% yoy)

• Based on survey conducted by SMECorp, approval rate is 85% (ThirdQuarter 2010 Survey on SMEs)

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Source: Bank Negara Malaysia

2011

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Bank Lending to SMEs

9Source: Bank Negara Malaysia – Quarterly Bulletin – 3Q2011

Supporting the SMEs

• Both the Government and the banks in Malaysiaacknowledge the importance of SMEs as engines of

th f thgrowth for the economy.

• Post financial crisis in 2009, various guarantee schemeswere introduced by the Government.

• A holistic framework of assistance and reforms were also

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put in place to assist the SMEs through each stage of itsbusiness cycle and developments.

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Growth / Expansion Companies

Early Stage Companies

Seed and Start-up

Loans by DFIsSME Bank

DistressExpansion

Funding available to SMEs at each stage of the business cycle

Loans by Govt agencies

Loans by Banks

Equity MAVCAP, MTDC, PNS BURSA

AIM, TEKUN, PUNB, MARA, PNS

Commercial Banks

SDRS

Agrobank, Bank Rakyat, EXIM Bank

MDV

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MTDC, CIP, MOSTI, MDec, Biotech

CGC

Syarikat Jaminan (PROKHAS)

Grants

Guarantee

• Microfinance Institutional FrameworkStrengthening the DFIs

Financial Infrastructure

A Holistic Framework implemented to assist SMEs

• BNMLINK, BNMTELELINK, Mobile LINK

Avenues to Obtain Information & Advice/Redress

• Strengthening the DFIs• Strengthening the DFIs• Credit Guarantee Corporation (CGC)• Credit Bureau Malaysia (CBM)• SME Financing Facilitation (ABM-PARTNER)

• Various BNM SME Funds • Venture Capital Funds

• Small Debt Resolution Scheme (SDRS)• Agensi Kaunseling dan Pengurusan Kredit (AKPK)

• Financing Help Desks at SME Business Associations• ABMConnect and eABMConnect• Complaint & SME Advisory Units at Banks•• SME Rejuvenation Programme (pilot)

Debt Resolution & ManagementFinancing Schemes

• Strengthening the DFIs

• Venture Capital Funds • Agensi Kaunseling dan Pengurusan Kredit (AKPK)

• Banking Info and SME Portal• Complaint & SME Advisory Units at Banks

• SME Rejuvenation Programme (pilot) (www.bnm.gov.my)

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• Venture Capital Funds

• Various CGC Guarantee Schemes• 10th Malaysia Plan: Working Capital Guarantee

Scheme (RM3b)• Green Technology Financing Scheme (RM1.5b)

• Agensi Kaunseling dan Pengurusan Kredit (AKPK)

• SME financial exhibition• Mass media advertisements• Distribution of promotional materials through

strategic partners, including Local Authorities

Outreach & Awareness ProgrammesGuarantee Schemes

• Venture Capital Funds • Agensi Kaunseling dan Pengurusan Kredit (AKPK)

• Mass media advertisements• Distribution of promotional materials through

strategic partners, including Local Authorities

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Small

• Financing size ranging between RM1,000 to RM50,000

Financial Infrastructure: Micro-financing

Key Benefits of

Microfinance

Financing Amount

EasyUse for

Business Purposes

• No collateral• Minimum documentation• Simple procedures

• Financing is offered to micro enterprises

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FastConvenient • Fast approval • Fast disbursement

• Widely accessible

Financial Infrastructure: Micro-financing (offered by 10 banks in Malaysia)

7 Commercial Banks

3 Development Financial Institutions (DFIs)

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• Established in 1972• Facilitate SMEs, without collateral or with inadequate collateral or Objective

Financial Infrastructure: Credit Guarantee Corporation (CGC)

no track record to access financing from financial institution

Key Initiatives

• CGC Financially Sustainable Strategy and Loan Repayment Plan• Expanded product range• Introduced:

- portfolio guarantee to enhance turnaround times- guarantee schemes for start-ups- direct lending

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Achievements

• Introduced risk based pricing structure• At end-Aug 2011, CGC has guaranteed more than RM48b financing

to 413,360 SME accounts since establishment• Outstanding guarantee of RM13b financing to 67,848 SME accounts

Objectives• Established July 2008• One stop center for financiers to

retrieve credit information and ratingsf dit l ti

Financial Infrastructure: Credit Bureau Malaysia (CBM)

Benefits to SMEs Achievements

CBM

for credit evaluation purposes• Platform for SMEs to build their track

record and credit standing tofacilitate faster processing of theircredit applications

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• Wider acceptance from financiers, on morefavourable terms, in a faster time

• Empowered to improve own credit profiles• SMEs have better knowledge when

providing credit or accepting guarantees

• Generated 350,000 reports since itsinception

• As at end-Sept 2011, CBM has 41 FImembers and 28,500 approved non-FI members

Source: Credit Bureau Malaysia

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Objective Streamline and simplify the processes and procedures of applications forSME loans

Financial Infrastructure – Financing FacilitationABM’s PARTNER Initiative (Phase 1)

Key features

Outcome

Provide SMEs with a package of documents consisting of the following:− An application form− A checklist for relevant documents which the applicant would required− Explanatory notes on how to complete the form− A common timeline for processing SME loan application− A directory of dedicated SME contact points at participating banks

• 14 commercial banks participated• 8 have adopted PARTNER’s version of the application form

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Outcome • Package of documents available at the banks’ and ABM’s websites or inhardcopy form at their respective SME contact points

• Phase 2 of PARTNER’s – to further refine or pursue other areas ofimprovement

Funding/Guarantee Schemes - Post 2009 financial crisis

• Business related loans (excluding share financingand personal consumption) with an aggregateNPL t t di t th RM3 0

Small Debt Resolution Scheme (SDRS)

Introduced by the Government in March 2009

NPLs outstanding not more than RM3.0mScheme (SDRS)

• Initial Fund Size RM5b (available until 31 Dec2010)

• RM1.05b approved as at 31 Dec 2010• Reallocated RM2b to WCGS

Industry Restructuring Financing Guarantee

Scheme (IRFGS)

• Initial Fund Size RM5b (available until 31 Dec2010)

• Additional RM2b allocated from IRFGS

Working Capital Guarantee Scheme

(WCGS)

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Additional RM2b allocated from IRFGS• RM7b fully utilized as at 26 Oct 2009(WCGS)

• Fund Size RM2b (available until 31 Dec 2009)• Maximum Tenure: 5 years• Fully utilized as at 31 Dec 2009

SME Assistance Guarantee Scheme

(SAGS)

Source: Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP)

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RM1.0 billion still available under BNM SME Funds at end-Aug 2011RM million

43 9Fund for Small and Medium Industries 2

Financing Schemes: BNM’s SME funds: Nearly 50,000 SME accounts approved

25.5

177.0

523.0

218.1

43.9

Micro Enterprise Fund

Bumiputera Entrepreneur Project Fund-i

New Entrepreneurs Fund 2

Fund for Food

Fund for Small and Medium Industries 2

91%Utilised

9%Available

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Total initial allocation: RM11.4 billion

Total financing approved: RM20.7 billion (due to revolving nature of funds)

Source: Bank Negara Malaysia and CGC

Guarantee Schemes: Credit Guarantee Corporation (CGC)

• Assist entrepreneurs with viable projects but lacknecessary collaterals

• Maximum coverage – 30% to 90%Credit Enhancer Scheme

Some examples of CGC guarantee schemes

g• Maximum guarantee – RM10m• Guarantee fee – 2.1% to 2.7% pa (for secured portion)

and 2.4% to 3.0% pa (for unsecured portion)

Credit Enhancer Scheme

• Assist start-up entrepreneurs to obtain guarantee cover directly from CGC

• Maximum coverage – 100%• Maximum guarantee – RM50,000 to RM2m• Guarantee fee – 0.5% to 3.0% pa (for secured portion)

and 0.75% to 3.5% pa (for unsecured portion)

Direct Access Guarantee Scheme Start-up (DAGS)

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• Assist entrepreneurs running viable businesses (but with insufficient collateral and lack of track record) which require more working capital

• Maximum coverage – 100%• Maximum guarantee – RM500,000

Enhancer Direct Scheme

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• To assist viable companies with Shareholder’s Fund of not more thanRM10 million to gain access to Working Capital financing

• Working capital financing

Objective

P f

Guarantee Schemes: RM3b allocated under 10MP Malaysia PlanWorking Capital Guarantee Scheme (10MP WCGS)

• Working capital financing• Not for refinancing of existing financing facilities granted by the same or

other Financial Institution

• RM50,000 – RM5 million per company• Up to 5 years and not exceeding 31 December 2015

• RM50,000 to less than RM2 million financing : 70% guarantee coverRM2 illi t RM5 illi fi i 50% t

Purpose of Financing

Guarantee Cover by the

Financing Size & Tenure

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• RM2 million to RM5 million financing: 50% guarantee cover

• Out of RM3b WCGS allocated, close to RM2b had been approved• Balance of RM1b allocation (for bumiputera) extended to 31 December

2012

Cover by the Government

Achievements

Source: Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP)

• Established 1 Jan 2010 to promote investments in GreenTechnology (GT) in support of national green agenda

• Producer of GT - To finance investments in production oft h l i

Objective

Purpose of

Guarantee Schemes: Green Technology Financing Scheme

green technologies• User of GT – To finance investments in utilisation of green

technologies

• Producer of GT – Max: RM50m per company• User of GT – Max: RM10m per company

• Producer of GT – Up to 15 years• User of GT – Up to 10 years

Purpose of Financing

Financing Size

Financing Tenure

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• Malaysia Green Technology Corporation and CGC

• Issued 103 GT certificates with project value totaling RM2.1b• 24 have been granted RM350.6m financing

Implementing Agency

Achievements

Source: Bank Negara Malaysia and Green Tech Malaysia

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1. SME Associations& Business Chambers

• Advice on how to improve SME’s ability to accessfinancing through FIs

• Improve awareness level of SMEs in the area offinancing

• Instill good financial mgmt practices

• Info on Govt programmes incl. funds & schemes

• SCORE & MCORE• Advice on biz plan & training needs

Avenues to Obtain Information and Advice / Redress

4 The Assoc Banks

5. BNMLaman Informasi dan

Khidmat Nasihat (LINK)

3 FIs

& Business Chambers SME Financing Help Desk

SME Help Desk at Government & private

sectors

• BNMLINK & TELELINKMOBILELINK: For general

2. SME CorpOne Referral Centre

• Advice on biz plan & training needs

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4. The Assoc. Banks in M’sia (ABM)

ABM Connect and eABMConnect

3. FIsSME Unit

• Providing lending • Ancillary support and

advisory services to SMEs

• For general enquiries relating to banking and credit issues

MOBILELINK: For general enquiries & complaints on financing-related matters

• SME Advisory Services1.Small Debt Resolution Scheme (SDRS)2.Agensi Kaunseling dan Pengurusan Kredit (AKPK): For redress and complex resolutions for SME financing

ABM CGC

Technical Training by Subject Matter Experts (1 day)

BNM SME Corp

Soft skill training and walkthrough of training manual by training consultant (1 day) – 2 weeks after Technical Training ++

1 2 • 6 Technical Training Sessions and 6 Soft Skill Training Sessions h b

Avenues to Obtain Information and Advice / Redress- Financing Helpdesk at SME Business Associations and “Train theTrainers” Program

‘Train-the-Trainers’ in 6 regionsABM CGC BNM SME Corp

Trainers of 19 business chambers / associations

Financing Help Desk Staff and SME Association members

‘Train’

Trainer’s Manual

Participant’s Manual

with

with

have been conducted in 6 regions nationwide

• 122 potential trainers have been trained from 19 business chambers/ SME associations in the economy

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SME members

Provide advisory

with• 30 financing help

desks have been established by SME Associationsnationwide


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ABMConnect Hotline1-300-88-9980

Avenues to Obtain Information and Advice / Redress- Dedicated Channels for General Enquiries and Credit Issues -ABMConnect Hotline and eABMConnect

• To receive queries and complaints on issues relating to thelocal conventional banking industry and general concerns aboutcredit.

• ObjectiveTo facilitate and create a conducive banking environment, andcomplements existing initiatives by the respective member

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complements existing initiatives by the respective memberbanks. It will provide another avenue for the banking industry toengage with the public and facilitate a deeper understanding ofissues which may arise from time to time.

• The majority of ABM’s member banks already operate theirown dedicated lines for customer service and are


own dedicated lines for customer service and arecommitted to active engagement with their clients in respectof specific matters relating to the member bank itself. Withthe establishment of ‘ABMConnect’, ABM can also nowassist in bridging any gaps which may occur in theindividual bank’s communication with its customers, ifnecessary.

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• Thus far, 98% resolution rate has been achieved forconsumers’ complaints.

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eABMConnect


• Taking ABMConnect a notch higher, the banking public has,with effect from 28 August 2009, been able to ‘connect’ withABM at anytime and anywhere through eABMConnect.

• ‘eABMConnect’, the online version, addresses the limitationsof ABMConnect which is only available during office hours.

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• Consumers may now submit their complaints and/or queries toABM 24 hours a day, 7 days a week and has been very wellreceived.

• Established November 2003 to support viable SMEsfacing financial difficulties

– Facilitate restructuring or rescheduling (R&R) offinancing facilities

– Provision of new loan / financing (where

Debt Resolution and Management - Small Debt Resolution Scheme (SDRS)

Provision of new loan / financing (whereappropriate)

• Viable SMEs with impaired financing• Viable SMEs facing difficulties with financing from

multiple financial institutions

• Applications submitted to PFIs• If applications declined by PFIs, the Small Debt

Resolution Committee (SDRC) conducts anindependent assessment on business viability and

Many SMEs gotinto trouble whenthey have moneyand yet not able tomanage themproperly (SDRC)

Many SMEs gotinto trouble whenthey have moneyand yet not able tomanage themproperly (SDRC)propose

– R&R, if eligible– New financing, where necessary

• Assisted 761 SMEs since establishment with financingvalue of RM725 m as at end-Sep 2011

• 75% success rate – businesses turned around,payments current or settled.

properly … (SDRC)properly … (SDRC)

Source: Bank Negara Malaysia28

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Outreach and Awareness Programmes

• ABM conducts nationwide SME dialogues and seminars toeducate and promote SMEs’ understanding of the financialavenues which are available to them It is also a platformavenues which are available to them. It is also a platformfor ABM and the various agencies to listen and understandthe issues / challenges faced by SMEs on the ground.

• Bank Negara Malaysia (BNM) together with agencies suchas CGC, SME Corp, Green Technology Malaysia areinvited to participate in the dialogues and seminars so as toensure that SMEs get the opportunity to understand the

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g pp yvarious financing available to them for different stage oftheir business cycle.

ABM’s SME dialogues and seminars conducted todate

A series of nationwide SME dialogues and seminars wereconducted since 2008

Year Month Venue

2011 OctJune

Sungai Petani (Kedah)Kuantan (Pahang)*

2010 OctOctMay

Kota Kinabalu (Sabah) Kuching (Sarawak)*Ipoh (Perak)

2009 DecAug

Kuala Terengganu (Terengganu)*, Batu Pahat (Johor)

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2008 Dec Penang*

*Dialogues only

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Snapshots of ABM’s SME dialogues and seminars

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Funds / Schemes Allocation Objective

SME Financing Fund RM2 billion Further strengthen SMEs’ contribution toeconomic growth

Moving Forward: Various Funds established for SMEs under Budget 2012

SME Revitalization Fund RM100 million Provide genuine entrepreneurs a second

chance to succeed

SME Emergency Fund RM10 millionAssist SMEs affected by natural disasters. Aproactive measure to help SMEs to recoverand start their business quickly

Commercialization Innovation Fund RM500 million Enable SMEs to commercialize research

products

Funds under TEKUN Increased to RM300 million from RM120 million Incentivise small entrepreneursmillion from RM120 million

Funds under AIM RM2.1 billion Provide micro financing to entrepreneurs,particularly for women

Government proposes that micro financing loan instruments be given stamp duty exemption


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Total Funds: RM5.01b

Total Funds: RM5.01b

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Funds / Schemes Allocation Objective

Commercial Agriculture Fund (expand the scope to i l d i ti RM300 million

Increase the number and income ofagropreneurs

New Funds to be introduced in Year 2012

include innovative agriculture projects)

g p

MyCreative Venture Capital RM200 million A pioneer project in producing creativeideas

Public Transport Development Fund Additional RM150 million To provide a more comfortable, reliable

and quality service

Market Validation Fund RM30 million Ensure viability of products throughMarket Validation Fund RM30 million market validation

Professional Services Fund RM100 millionEncourage professionals such aslawyers, doctors and accountants to setup firms in small towns

Source: Bank Negara Malaysia 33Total Funds:

RM780mTotal Funds:

RM780m

• There is a holistic financial landscape for SMEs to access financingin Malaysia. SMEs are assisted at each stage of their business cycle.

• Continuous educational and awareness programmes are conductedto promote SMEs’ understanding of the financial avenues available

Benefits to SMEs

to promote SMEs understanding of the financial avenues availableto them.

• In view of the challenges and opportunities in the changinglandscape, Bank Negara Malaysia’s new Financial Sector Blueprintis formulated to:

Promote strong foundation of financial system that best servesthe needs of a high value-added and high income economy.

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Further promote financial inclusion to achieve an inclusive andbalanced growth.

• SME Masterplan 2011 - 2020 is being developed by SMECorporation Malaysia to create a better ecosystem for SMEdevelopment.

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• Increasing overhead cost (61%) and cost of material(57%)

The Challenges Faced by SMEs

(57%)

• Cashflow /Liquidity problem (48%)

• Delay in collection of payment (38%)

• Lack of external financing (38%)

Source: Kajiselidek PKS ST3, 2010, SME Corp35

Meanwhile, SMEs should on their part :

• Adapt to the changing environment.

SMEs to play a role themselves

• Enhance their ability to compete and remain relevant withthe emergence of stronger competition from emergingeconomies.

• Ensure greater access to skills and leveraging ontechnology.

• Adopt stronger business culture and entrepreneurial spirit• Adopt stronger business culture and entrepreneurial spirit.

• Be less reliant on Government subsidies/incentives.

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Questions and Answers

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Thank youTerima kasih

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