KUALA LUMPUR, Sept 6 — Development financial institutions (DFIs), or specialised banks, should provide more funding opportunities to micro, small, and medium enterprises (MSMEs), and not just focus on big companies.
Putra Business School (PBS) associate professor Ahmed Razman Abdul Latiff said additionally, the purpose of financing these businesses should be more towards contributing to the real economy.
“Priority should be given to the companies that require financing for the purpose of expansion or coming out with new products, and not for those companies which seek financing for the purpose of refinancing or investing in other companies.
“When the companies seek expansion and create new products, it will contribute to the real economy via the hiring of new workers and an increase in liquidity in the market,” he told Bernama today.
Ahmed Razman was commenting on Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz’s statement on Monday urging DFIs to provide full support to the country during the recovery period.
Tengku Zafrul said today that in formulating Malaysia’s economic recovery strategy, the Ministry of Finance (MoF) sees DFIs as having a strategic and important role in the country’s efforts to restore and retain the capacity of businesses to provide employment opportunities and support livelihoods.
Ahmed Razman said the government can also come up with policies that will encourage more businesses to seek financing from DFIs rather than from commercial banks as DFIs can ensure a higher probability of success to these businesses due to the specific nature of their business, which is to focus on assisting the businesses.
“However, good governance, transparency, integrity, and accountability must be practiced among these DFIs as we do not want to see past scandals surrounding DFIs to be repeated again,” he added.
Sunway University professor of economics Yeah Kim Leng said the MoF statement was timely and served as a clarion call to action.
“In fact, DFIs, government-linked companies (GLCs), and all government ministries should review their plans with the aim of supporting the economic recovery.
“They can do directly by speeding up their financing, spending or investing activities or indirectly by assisting the private sector and businesses to resume full operations with minimal regulatory burden and cost impact,” he said.
According to Yeah, a well-coordinated approach among all agencies and ministries will have a much greater multiplier impact on the economy and will also enhance consumer and investor confidence in the government despite the uncertain political situation.
Bank Islam chief economist Mohd Afzanizam Abdul Rashid said the DFIs have provided appropriate support during the pandemic, but a greater focus is needed in order to help restore and retain the capacity of businesses.
“Perhaps, what is needed is the right ecosystem whereby the micro or medium enterprises are able to excel in their business. This is simply because the business landscape is very fluid and keeps evolving. With the pandemic, all the more reason that these businesses really should have a clear business plan,” he said.
In addition, he said the ecosystem for business may go beyond financing and include how the DFIs can collaborate with other government agencies and state governments to make sure that small businesses can future-proof their business from potential shocks.
“The collaboration could be in the form of business training like marketing, finance, and strategy as well as providing access to export markets and integrating themselves with the global supply chain. If we think that way, finance is only one part of the equation in order to (improve) these businesses,” he stressed.
Veteran economist and chairman of Asian Strategy and Leadership Institute (ASLI) Center of Public Policy Studies Tan Sri Ramon Navaratnam said DFIs must be more empathetic and relaxed in their lending terms and to provide easier financial terms.
“Do not be too hard on the terms. Hold their hand and help SMEs recover,” he said.
Citing the entrepreneur Tan Sri Jeffrey Cheah who has said Malaysian policymakers need to craft extraordinary policies to help the nation overcome the challenges brought on by the COVID-19 pandemic, Ramon said it’s time for DFIs to relax the terms of the National Entrepreneurship Policy (NEP).
He said the call was timely amid the country’s fiscal constraints, budget deficits, and declining foreign direct investment (FDI).
DFIs also need to encourage more foreign investments rather than chasing them away like what the Malaysia My Second Home (MM2H) programme has done, he noted.
“DFIs must be encouraged to be more risk-takers while racism and religious bigotry must be countered.
“DFIs cannot work well if the brain drain and investment outflow continue,” he said. — Bernama
