SMEs sceptical banks will heed government’s call to ease lending

SMEs are the country’s biggest employers with up to seven million workers on its payroll. — Picture by Sayuti Zainudin
SMEs are the country’s biggest employers with up to seven million workers on its payroll. — Picture by Sayuti Zainudin

KUALA LUMPUR, June 20 — Small and medium enterprises (SMEs) remain doubtful that creditors will ease lending, despite Putrajaya’s appeal for banks to loosen their strict loan standards as the economy picks up.

SME Association of Malaysia president Datuk Michael Kang Hua Keong instead reiterated calls for the government to help set up a private SME bank, a demand that underscores the industry’s long gripe with Bank Negara Malaysia’s strict lending regulations.

Kang said he was leery banks would heed the government’s plea.

“I don’t think (commercial) banks would listen,” he told Malay Mail.

“Banks are profit-driven... and these banks are (also) governed by BNM.”

Yesterday, Finance Minister Lim Guan Eng said banks should loosen loan requirements to SMEs and first-time homebuyers to help boost growth, after the latest data showed retail spending grew by over 5 per cent in a sign that consumer confidence had improved.

Lim also said banks shouldn’t categorise restructured loans from good borrowers as “non-performing loans”, a policy SMEs said mainly punishes smaller businesses and start-ups which often rely on flexible repayment for improve cash flow.

Companies with NPLs are deemed risky, making it tougher for them to secure loans.

Despite being the country’s biggest employers with up to seven million workers on their payroll, SMEs claim they receive little financial or technical support from the government despite the large federal budget allocated annually to support the sector.

The Pakatan Harapan administration set aside nearly RM18 billion in grants and loans for SMEs under the 2019 federal Budget, but Kang told Malay Mail in an interview in May that small companies often have difficulties accessing the fund.

This included securing loans from SME Bank Malaysia, the bank owned and founded by the Ministry of Finance exactly for the purpose of helping SMEs.

Like commercial banks, the SME Bank must also comply with BNM’s loan prerequisites.

SME Association of Malaysia president Datuk Michael Kang has reiterated calls for the government to help set up a private SME bank. — Picture by Hari Anggara
SME Association of Malaysia president Datuk Michael Kang has reiterated calls for the government to help set up a private SME bank. — Picture by Hari Anggara

Kang said SMEs want a “special” fund set up without having to comply with central bank regulations, or consider relaxing some of the charges commercial banks impose on business loans.

“We need a special bank that can help SMEs which is under the PM’s office or MoF (Ministry of Finance), but not under BNM,” he said.

“We are looking to see if banks can reduce the cost including all the (service) charges. That would be good.”

But BNM would likely discount the claim. In its 2018 annual report released in March, its survey showed most SMEs have no difficulty securing loans from commercial banks or other financial institutions.

The report said SMEs had a 94 per cent loan approval rate for that year, with up to 89 per cent of applications approved within a month.

It noted further that funds were typically disbursed in the subsequent month at a rate of 87 per cent.

However, the same report said only 13 per cent of SMEs sought loans from commercial banks, while the rest were said to have obtained unsecured financing from microfinance or development financial institutions. Microfinance financial institutions often charge exorbitant interest rates.

The Ministry of Finance said yesterday household financial assets is now 2.1 times of the household debt level, while total retail sales rose by over 5 per cent in April to RM41.6 billion from RM39.1 billion year-on-year, indicating improved business confidence.

SMEs account for nearly a third of the country’s gross domestic product and close to one fifth of total exports.