Focused and Coordinated Development of Small and Medium Enterprises (SMEs): The Malaysian Experience Conference on SME Financing: Issues and Strategies 10

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Focused and Coordinated Development of Small and
Medium Enterprises (SMEs)The Malaysian
ExperienceConference on SME Financing Issues
and Strategies 10 11 May
2005Lahore, PakistanPresentation by Mr
Marzunisham OmarDirector, SME Special
UnitCentral 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

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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

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Status of SMEs

• Potential for SMEs to contribute more to domestic
  economy

For Malaysia, based on SMEs in the
manufacturing sector only
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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 coordination and outreach of SME
development across all sectors
Small Inward Looking
Internal External Constraints
Enhance SMEs capacity to compete with focus on
quality, management marketing
Low Value Add Less Competitive
Enhance access to financing by SMEs
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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

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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

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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

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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
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Banking System Services for SMEs
Banking System Other Services to Enhance SME
Financing
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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

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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

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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

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SME Special Unit at Bank Negara Malaysia

• Established to lead BNMs 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