This article first appeared in Enterprise, The Edge Malaysia Weekly on July 13, 2020 - July 19, 2020

Aria Putera Ismail, CEO and group president of Small Medium Enterprise Development Bank Malaysia Bhd (SME Bank), is excited. He sees the Covid-19 pandemic — which has upended the businesses of most of his clients and forced them to pivot or adopt new methods — as a time of opportunity.

“The good thing about Covid-19 is that it has changed our way of doing things, forcing us to be more creative and self-sustaining, and be less dependent on middlemen,” Aria tells Enterprise in an interview at the bank’s headquarters in Kuala Lumpur recently.

And it has been a busy time for the bank. After the Movement Control Order (MCO) was announced, and then extended, many of the bank’s clients suffered from the fallout of no income but the same or slightly reduced expenses. They needed some liquidity to tide them over and SME Bank was one of the agencies appointed by the government to channel much-needed relief through the Special Relief Facility.

“We are like the frontliners in that we have given our commitment to make sure that the funds are channelled to entrepreneurs in a timely fashion. We expedited the process at our end to four days [it used to take eight to 10 days],” says Aria.

He describes the pandemic and its impact on the economy as being “beyond anyone’s imagination”. “None of us foresaw how badly it would affect our day-to-day lives and the economy as a whole, not just in Malaysia but globally,” he says.

“However the banks, especially SME Bank, looked at how we could facilitate the situation after the announcement of the Special Relief Facility under Prihatin during the MCO. We simplified our application process to obtain financing without compromising on the risk aspect.

“Of course there are limitations, as our team could not do site inspections. But this is where the trust that has been built between the customer and the bank comes in. They gave us documentation to support their applications and we were able to assist them financially in a timely manner.”

Now, the country has moved from Prihatin (which was to prevent bankruptcies and rampant job terminations during the MCO period) to Penjana (which is aimed at restarting the economy). SME Bank has been put in charge of two high-impact initiatives — the SME Technology Transformation Fund (STTF) and the SME Go scheme for liquidity support.

“There are a few key economic sectors that have a higher multiplier effect such as construction. SME Go is one of 40 initiatives announced under Penjana and it is aimed at empowering SMEs that are G2 and G3 contractors, who will be awarded contracts under the Economic Recovery Plan. We are allocating RM1.6 billion to benefit 16,000 G2 and G3 contractors by financing their working capital,” says Aria.

These contractors were awarded projects under the previous two stimulus packages.

“We are giving them 100% financing without the need for collateral. We believe this will help kick-start the economy. Our team will be going to the ground and meeting a few groups of contractors to make sure they are aware that we have SME Go to facilitate financing for their working capital,” he says.

Aria also spoke about the STTF. “This is something very exciting and challenging because we know that when Covid-19 landed in Malaysia, it changed our way of doing things and the whole economic landscape. People are talking about the new norms. Conventional business methods may not be applicable anymore,” he says.

“So, what they need is a transformational business plan to recover from this pandemic, especially during this time. We are allocating RM500 million to ensure that SMEs — not just our clients but SMEs in general — can benefit by implementing new technologies and digitalisation in their new business plans.”

Aria acknowledges that people are asking why SME Bank is not involved in more initiatives under Penjana. Basically, it is a matter of fairness and reach, he says. “The government needs to ensure that the RM10 billion (allocated under Penjana) is given to all beneficiaries effectively. So, it cannot be just through SME Bank.

“If you are looking at smaller SMEs in rural areas, Bank Simpanan Nasional and Tekun Nasional have a better network there. These agencies are everywhere in the country, even in remote areas where SME Bank does not have a presence.”

Aria and his team recently flew to Langkawi to talk to clients there, most of whom are in the tourism industry, which has been the worst hit by the pandemic and MCO. “Some of them were ready to throw in the towel. So, we engaged with them and convinced them to rethink the way they did things,” he says.

“Of course, many things are beyond us, like the ferry service, which is still making only one trip a day. But we handhold and help them to the best of our ability, looking at what new things they can introduce and what technologies they can adopt.”

For instance, Aria suggested that the various companies in Langkawi get together, start their own e-marketing channel and share the costs.

Then, there are the restaurants, which can only operate at half capacity after reopening. “If you look at Thailand and Taiwan, businesses there have invested a small amount of money to put up partitions between the tables and so, are able to operate at full capacity. It may not look attractive, but little tweaks like these are how you will survive,” he says.

During Aria’s trip to Langkawi, he not only met hoteliers but also those in retail and transport providers. “They (the transport providers) told me they wanted the banks to take over their financing from the credit companies, which were not subject to the moratorium [meaning these businesses were forced to continue servicing their loans with the credit companies during this difficult time].

“What we observed was that the credit companies that supplied the trucks and buses did not really help our SMEs during this time. So, these businesses asked us to take over the loans. But we cannot really do that.

“It would mean starting over the due diligence process from scratch. It would be easier if they asked us to finance the purchase of new buses. But right now, cash flow is very tight, so they are not going to do that.”

Most companies are not looking forward to the time when the moratorium on loans is lifted and Aria’s team has been busy rescheduling and restructuring their financing. “Most of them are struggling and will not be able to pay what they were paying before. So, our team is working at full capacity to help them reschedule and restructure their loans. This will free up their cash so they will have more time to recover before they can service their loans as per normal going forward,” he says.

SME Bank is targeting to complete this exercise before the moratorium expires.

But as Aria is quick to point out, financing is not all the bank offers. It also offers training programmes through its Centre for Entrepreneur Development and Research (Cedar), which were free during the MCO, but few SMEs availed themselves of these programmes.

“This is not really classroom training. We do handholding to try and open the SMEs to new knowledge and information and to look beyond their conventional way of doing things. We want them to look at things such as automation, where the new demand will be, and what sectors have better opportunities now,” he says, adding that there is a wealth of information available to those savvy enough to take advantage of it.

Recently, SME Bank inked a memorandum of understanding with the Department of Statistics, which will share information with the bank to enable it to come up with a more impact-based approach to SMEs.

“Most of the information the Department of Statistics provides will be analysed and shared with our clients, so they will have a better picture of what is going on in the economy, what they should be doing and what they will need to prepare for in terms of meeting the new demand or tapping new opportunities. This collaboration is one of our most significant initiatives this year,” says Aria.

He adds that a complaint he frequently hears from SMEs is that they do not know which agency to go to for financing. That is why SME Bank has come up with ScoreXcess, an artificial intelligence-driven credit scoring service.

“We wanted to create a single entry, where the companies submit basic information and we channel them to the proper agency. Through this initiative, we hope to eliminate the middleman,” says Aria.

“Currently, some entrepreneurs have no idea how to get access to financing and they are being exploited by middlemen who take advantage of their situation.”

Despite the pandemic, this has been an active year for SME Bank. At the beginning of the year, it launched Odela, the first bank-backed e-commerce platform in the country.

“As a DFI (development finance institution), we wondered how we could offer an intervention to SMEs if we did not have the proper tools. That is why we launched ScoreXcess, to ensure that micro-enterprises can get financing, by channelling them to the respective agencies with wider network coverage,” says Aria.

“That is also why we launched Odela. We want informal businesses that sell stuff on Facebook and Instagram to become formal businesses and trade on our e-commerce platform. We want our clients to source raw materials at cheaper prices on the platform.”

Odela had a soft launch in March and has seen RM400,000 in transactions. “Now we are onboarding SKUs (stock keeping units). We want to optimise their costs, keep track of their spending and ensure that they are buying the right things at the right prices,” he says.

“The moment their volume of purchases increase, we will know that their businesses are improving and we can intervene with additional financing, without them having to come forward to ask for it. We can keep track of them and that is the whole motivation behind this e-commerce platform.”

Aria is looking to transform the SME in SME Bank from “small medium enterprise” to “subject matter expert”. “We want to be the Institut Jantung Negara (IJN) of SMEs. If you had a problem with your heart, you would think of IJN before other hospitals because it has the specialists and latest technology. We want to be that type of bank for SMEs,” he says.

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