KUALA LUMPUR, Aug 10 — Malaysia needs a new definition of delinquent loans, former finance minister Tun Daim Zainuddin said today.
The adviser to Prime Minister Tun Dr Mahathir Mohamad also said a new progressive approach to helping the country’s lowest income earners who make up 40 per cent of workers, known as the B40, is needed.
In a commentary published by The Edge today, the former Council of Eminent Persons chair said more out-of-the-box thinking is needed to help small and medium enterprises thrive, adding that good access to banking and credit sources is a must.
“We Malaysians need to review the definition of delinquent loans and take a developmental approach.
“Certain lenders like SME Corp and Agro Bank have a different mandate and are able to take up these business loans.
“The SME loan segment is understandably riskier from a credit perspective, and needs a framework that can take these specific risks into consideration, whilst still giving lenders the legroom to cater to the needs of this group,” Daim wrote.
He also suggested government-linked companies (GLCs) to revamp their financial models, proposing the setting up of smaller subsidiaries catering to SMEs credit needs.
“This can then be further expanded to think of new financing initiatives for housing and educational need, especially for the B40 group,” Daim added.
He called for a concerted approach to help industries that have been placed under the national economic agenda.
He cited agriculture as a prime example, and called for a framework on how financial institutions can help support businesses under this sector.
The 81-year-old said the current financing terms require repayment of loans or servicing of interests to start immediately, which is not conducive as new businesses take at least one year on average before they stabilise and show profit.
“A possible solution to this would be to allow banks to structure these loans, such that repayment takes place later, in line with the projected cash flow of these companies.
“The government can identify specific industries in line with the National Economic Plan, whereby companies within these sectors have specific guidelines with regards to loans,” he added.