Relaxed lending guidelines just a band-aid for SMEs

This article first appeared in The Edge Financial Daily, on July 31, 2019.

Chua: There needs to be faster government policies on approvals with less licensing restrictions. The Edge file photo

Kang urges entrepreneurs to change their mindsets and adopt new ways of doing business. The Edge file photo

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KUALA LUMPUR: Small and medium enterprises (SMEs) see Bank Negara Malaysia (BNM) loosening lending guidelines for the segment as just a temporary measure compared to wider structural issues they are facing.

They said what is needed are short- to medium-term solutions encouraging tourism and foreign direct investment in the country to elevate domestic consumption.

“There needs to be faster government policies on approvals with less licensing restrictions,” said Malaysia Retail Chain Association president Datuk Seri Garry Chua.

“Each state and ministry should be given key performance indicators and time frames [to achieve them] to stay competitive,” Chua told The Edge Financial Daily.

Amid the trade conflict between the US and China, Chua said Malaysia being friendly to both countries should offer opportunities for SMEs to adopt a more aggressive engagement to take advantage of existing close ties.

Last month, The Edge Malaysia weekly reported that BNM had relaxed the guidelines for SMEs whereby, subject to certain conditions, a rescheduling and restructuring of loans within two years will give lenders some breathing space in a challenging operating environment, and prevent the loans from being classified as impaired in the Central Credit Reference Information System.

BNM said the measures are aimed at assisting viable SMEs facing temporary constraints in the current environment.

SME Association of Malaysia national president Datuk Michael Kang Hua Keong said the central bank’s move is a good incentive for SMEs to release some pressure arising from not only lower sales, but also that caused by delays in goods and services tax refunds.

“This is definitely a positive for SMEs. But for the whole SME ecosystem, SMEs should change their ways of doing business,” he said.

Instead of hoping for the government to intervene in solving issues concerning SMEs, Kang urged entrepreneurs to change their mindsets and adopt new ways of doing business.

“SMEs must adapt to the digital world and working with young people as the business model has changed in a cashless world.”


Other forms of government help

So far, the government has taken some proactive initiatives to support the development of SMEs amid a challenging business environment.

For instance, SME Corp Malaysia chief executive officer Noor Azmi Mat Said pointed out that the government had continued supporting the long-term agenda of SME development through implementing the SME Masterplan 2012-2020, initiated by the previous government. Further, the government has introduced the National Entrepreneurship Policy 2030.

“The focus is not only on existing SME businesses but also to encourage business formation through acculturation of entrepreneurship, especially among youths and women,” he said.

Noor Azmi said the initiatives are also intended to raise SMEs’ productivity by encouraging the shift towards automation and mechanisation.

“The development of start-ups and an emphasis on SMEs bringing innovation to market, as well as enhancing access to early-stage financing for SMEs, should help towards building an ecosystem to encourage innovation and entrepreneurship.”

Besides BNM loosening lending guidelines for SMEs, Noor Azmi said the government is supporting and promoting alternative financing platforms as well to give SMEs some breathing space to grow before they are expected to produce returns on investment.

The government also announced earlier this month that RM90 million had been raised from the SME Investment Partner (SIP) Programme, of which RM40 million had been channelled from the government via SME Corp.

The SIP Programme, one of the high-impact programmes under the SME Masterplan, is a co-funding initiative between the government and the private sector, with the objective of enhancing access to financing for SMEs — particularly those at an early stage — through providing risk capital financing.

Under the programme, SME Corp appointed fund management firm SME Partners to help raise funds from private investors that will be matched by government funds through SME Corp.

The fund’s SME partners, Warisan Quantum Management Sdn Bhd and RHL Ventures Sdn Bhd, have raised up to RM50 million to be matched with the government’s seed fund.