SME and Micro Financing: Malaysia's Experience

SME and Micro financing: Malaysia’s Experience
Presentation for the Financial Inclusion Advisors Programme

Kampala, Uganda
Development Finance and Enterprise Department

Bank Negara Malaysia
26 April 2010 1
1
Outline
• Context:
The Malaysian economy
The Malaysian financial system
Bank Negara Malaysia’s mandate
• Malaysia’s Experience:
SME financing
Micro financing
Consumer protection & redress
• Way Forward 2
2
1957-2008: Four different phases of economic growth
In the last 5 decades, Malaysia has witnessed major structural transformation of the economy
1957-70 1971- 85 1986-99 2000 onwards
Towards higher
Commodity-driven and Rural development and Rapid industrialisation and knowledge-based
import substitution nascent industrialisation global integration economy…
1997-98 2009
1985 Global
Asian
Recession Recession
Crisis
1960 1970 1980 1990 2000

2009
• A private-sector driven, • Government emphasised on • Post-crisis, Government • Policy thrust to develop

commodity-based economy rural development and initiated pursued rapid industrialisation, Malaysia into a
effort on industrialisation export promotion and knowledge-based
• Pursued an import economy
introduced economic
substitution strategy • Malaysia entered first recession
liberalisation • Growth was driven by
in 1986 - collapse in commodity
domestic demand
prices, twin deficit position • Malaysia entered second
recession in 1998 – due to
3 speculative attacks on Asian
currencies
3
Outcomes of four decades of economic transformation
 Transformation into an upper

middle income economy
− 7-fold increase in per capita
income from RM1,132 in
1970 to RM25,800 in 2008
− Incidence of absolute
poverty reduced from 49%
in 1970 to 3.6% in 2007
 Sectoral diversification into

services and manufacturing
− Services share of GDP
grew from 42% in 1970 to
55% in 2008
4
− Manufacturing share of
GDP rose from 13% in 1970
to 29% in 2008
4
Outline
• Context:
SME financing
Micro financing
• Way Forward 5
5
Malaysian Financial System Landscape
ONSHORE OFFSHORE
• Commercial Banks • Insurance Intermediaries Offshore

• Islamic Banks • Money Brokers financial
• Development Finance • Dealers / Brokers institutions
Institutions • Venture Capital / Private Equity
Financial Institutions • Investment Banks • Unit Trust Companies
• Insurance Companies • Fund Management Companies
• Takaful Operators • Stock Broking Companies /
• Reinsurance Companies Universal Brokers
Non-Bank Financial Intermediaries
• Money Market • Capital Market

Financial Markets • FOREX market  Equities Market
• Derivatives Market  Bond Market
Payments and Settlement Systems
A dual financial system with conventional and Islamic finance operating in parallel
6
Size of financial system participants
• Total assets of financial system at end-2009 was RM2.8 trillion
• Banking system continues to be primary financial intermediary

 Accounted for >50% of financial system assets
No. of financial institutions in Malaysia (as at end 2009)

Investment Development
Commercial Bank 9 13 banks financial
Islamic banks 2.2% institutions Life insurance
8.1% 5.9% funds
Islamic Bank 11 9
4.9%
Investment Bank 15 0
General
DFI 6 0 insurance funds
0.9%
Insurance Co 25 15
Commercial EPF & other
banks pension funds
Reinsurer 3 4 Other financial
Domestic 40.9% 16.8%
intermediaries
Takaful operator 8 1 Foreign
Bank Negara 7.1%
Malaysia
Retakaful Operator 2 1 13.1%
0 5 10 15 20 25 30 35 40 45
7
The financial sector today is more resilient, efficient and competitive
Strong key financial indicators Enhanced contribution of financial sector

to economy
Domestic Foreign Finance &
Commercial Insurance 2003 2009
Banks 2003 2009 2003 2009
Sector
Profitability Annual Growth 6.4% 4.4%

Return on Equity 11.7 12.7 21.0 25.7 Share of GDP 9.7% 11.7%
(%) 1.1 1.2 1.6 2.0
Return on Assets
(%)
Asset Quality
NPL Ratio – 3mth 9.5 1.7 4.5 1.7
classification (%)
Av. Asset Size
44.9 95.9 12.3 21.0
(RM bil)
Shareholders’
Funds 4.0 9.3 0.9 1.7
(RM bil)
8
Outline
• Context:
SME financing
Micro financing
• Way Forward
9
Central Banks in emerging economies have a wider role to promote
balanced & equitable growth
• More hands on approach to ensure efficient,

competitive and resilient financial sector that
Approach contributes to overall economic growth and stability
• Developmental role in charting direction and institutional

Consideration to
set-up of financial system and overall economy
socio-economic
agenda • Financial inclusion to ensure that all segments of
society have access to financial services
Greater challenges in
preserving financial stability • Greater sensitivity to political & socio-economic
as emerging markets are imbalances
more fragile
10
10
Mandate under the new Central Bank Act 2009
CBA 1958 CBA 2009
Mandates broadly defined Strategically focused
Principal objects Principal objects

Promote monetary stability and financial stability
conducive to the sustainable growth of the Malaysian
• Issue currency and to keep reserves economy
safeguarding the value of currency
• Promote monetary stability and a sound financial Primary functions

structure
• Formulate and conduct monetary policy
• Promote the reliable, efficient and smooth
operation of national payment and settlement • Promote exchange rate regime consistent with
systems and ensuring that systems policy is fundamentals
directed to the advantage of Malaysia
• Regulate and supervise financial institutions
• Act as a banker and financial adviser to the
Government
• Promote sound, progressive and inclusive
financial system
• Influence the credit situation to the advantage of
Malaysia • Provide oversight over the money and foreign
exchange market
11
• Hold and manage foreign reserves of Malaysia
• Issue currency
• Exercise oversight over payment system
11
Outline
• Context:
SME financing
Micro financing
• Way Forward 12
12
Malaysia ranks high in terms of access to financing
Category Ranking / Response Source
‘Getting Credit’ No. 1 for 3 years World Bank (Doing Business

2008, 2009 & 2010 Reports)
‘Loans accounts per No. 5 Consultative Group to Assist

1,000 adults’ the Poor (Financial Access
Report 2009)
‘Ease of Access to Loans’ No. 13 in 2009 (up from World Economic Forum
no. 15 in 2008) (Global Competitiveness
Reports 2008-2009 and
2009 – 2010)
‘Financing from FIs’ 77% of respondents SME Corp (3rd Survey on

received financing from Impact of Global Crisis on
the FIs SMEs, 2009)
‘Obtaining Financing from 13

62.9% of respondents FMM (3rd Survey on Global
FIs’ did NOT face difficulties Economic and Financial
Crisis, 2009)
13
Banking system is the major financier to SMEs
Financing Outstanding as at end-Feb 2010

RM billion
BIs • More than 80% of total SME

120.4 financing are from banks
DFIs
16.7
• Banks have 522,141 SME
accounts
Government Funds and Schemes1
8.9
Venture Capital2
1.9
Factoring and Leasing2
1.8
1/
At end-Sep 2009
2/
At end-2008
Source: Bank Negara Malaysia, SME Corp and Securities Commission
14
Banks continued to support financing needs of SMEs in difficult environment
SMEs’ share of business financing

Approval rate remained high at 84% increased significantly to 39%
% %
100
SMEs End-Feb 39
84 2010
75
72
Title
All customers
Measure End-1998
50 27
2003 2004 2005 2006 2007 2008 2009 2010
J-F
Source: Bank Negara Malaysia
15
SMEs in all economic sectors have access to financing
Financing Outstanding by Sector
Agriculture
5% Others
9%
• BIs continue to support the
financing needs of the key
Construction economic sectors
12%
Services
50% • Services sector accounted
for the largest share (50%)
of total financing outstanding
at end-Feb 2010
Manufacturing
24%
RM 120.4 b as at end-Feb 2010
Source: Bank Negara Malaysia
16
Comprehensive initiatives to ensure continued access to financing
for SMEs
Financial Infrastructure
Central Credit Reference

Information System • Credit database to facilitate a more efficient & effective credit process
• Check financial standing of customers & suppliers
SME Credit Bureau
• Assist SMEs that have inadequate track record or collateral to obtain credit
Credit Guarantee facilities from FIs by providing guarantee cover
Corporation
• Offer a wide range of products (e.g. credit enhancement products) and
services (e.g. advisory, market research) to enhance SMEs’ ability to obtain
financing
Financing Schemes Guarantee Schemes
• BNM SME Funds • SME Assistance and Modernisation Facilities (RM1.2

Recent
• EXIM Overseas Guarantee Facility bil)
stimulus • 17
SME Assistance Guarantee Scheme (RM 2 bil)
• Venture Capital Funds for
Agriculture measures • 2 Government Guarantee Schemes (RM10 bil)
 Working Capital Guarantee Scheme & Industry
Restructuring Financing Guarantee Scheme
17
Central Credit Reference Information System (CCRIS) as the main credit
database in Malaysia, enhances access to financing for SMEs
Description Benefits
• Provide credit information to
• Managed by and located FIs to:
at BNM – Facilitate credit
To FIs assessment of customers
– Facilitate credit risk
management
– Promote more efficient
credit processes
• Collect info from banks
and regulated FIs
Benefits of • Facilitate BNM for
To BNM regulatory, supervision
CCRIS
and analytical purposes
• Comprehensive database
18
To the public • Conduit to inculcate good
credit culture
18
CGC’s SME Credit Bureau (www.smecreditbureau.com.my)
• One-stop central database of credit-

related info on SMEs that provide
consolidated credit information,
including credit ratings
• Benefits to SMEs
• Access financing on more favourable terms,
and obtain faster decisions on financing
applications
• Have financing applications evaluated on a
more balanced and objective basis
• Identify areas for improvement
(reports and ratings as a self-evaluation tool)
• Check financial standing of customers &
suppliers
– Decide whether to give better credit terms or
accept their guarantees
• Commenced operations in July 2008
• Currently open to SMEs for registration at 19
www.smecreditbureau.com.my
• More than 28,000 SMEs and 38 FIs have
registered as members
19
CGC was established to assist SMEs with inadequate collateral or track
record get access to financing
Roles
• Provide credit guarantees and advisory services to
SMEs that do not have adequate collateral or track
record, in a financially sustainable manner
Outcomes
• Bridge the gaps between businesses and banks via
guarantee mechanism • Guaranteed more than
• Embarked on transformation plan in 2006 RM45.3 billion financing to
404,460 SME accounts
Key achievements since 1972
• Expanded scope of guarantee beneficiaries to include Islamic • Outstanding guarantee of
banks and DFIs RM11.1 billion financing to
• Expanded product range 41,646 SME accounts as
- Participated in securitisation of SME loans as credit enhancer
at end February 2010
- Introduced equity financing through joint venture with global • SME Credit Bureau -
fund management company members registered as at
- Introduced guarantee scheme for start-ups Feb 2010 were 38 financial
- Introduced direct lending institutions & 28,200 SMEs
• Introduced risk based pricing structure for guarantee
20
• Established SME Credit Bureau in 2008, subsidiary to
provided credit information services on SMEs
20
Recent risk sharing schemes have assisted viable SMEs to obtain financing
More than 20,700 SME accounts approved RM11.0 bil approved

No of accounts (‘000) RM billion
SME AGS 10.3 WCGS 7.0 (Fully utilised)
WCGS 5.3 SME AGS 2.1 (Fully utilised)
SAF&SMF 4.9 SAF&SMF 1.1 (Completed)
IRFGS 0.2 IRFGS 0.8
Source : CGC and Prokhas
SME AGS - SME Assistance Guarantee Scheme, BNM (as at 21 Mar 2010)
SAF & SMF - SME Assistance and SME Modernization Facilities, BNM (as at 21 Mar 2010)
WCGS - Working Capital Guarantee Scheme Facility, MOF (as at 25 Mar 2010)
IRFGS - Industry Restructuring Financing Guarantee Scheme, MOF (as at 25 Mar 2010)
21
Outline
• Context:
SME financing
Micro financing
• Way Forward 22
22
Financial inclusion objective to promote balanced growth
Access to Financing
FINANCIAL INCLUSION
Ensure that every
economic activity,
geographical region & Access to Financial Services
segment of society
has access to
financial services Access to Financial
Assistance
Access to Financial
Information
23
PROMOTE BALANCED & EQUITABLE GROWTH
23
Importance of financial inclusion
Ensure all economic sectors, regions and the population at large have
access to a broad range of financial products and services
• • Bring
Bringlower
lowerincome
incomegroups
groupsand
andmicro
micro
enterprises into the economic
enterprises into the economic
mainstream
mainstream
Promote
Promotebroad
broadbased
based
and
andbalanced
balancedgrowth
growth • • Enable
Enablepoorer
poorersegments
segmentsofofthe
the
population
population and micro enterprisestoto
and micro enterprises
participate
participateininincome-generating
income-generating
economic
economicactivities,
activities,thereby,
thereby,
equalising
equalisingopportunities
opportunitiesandandreducing
reducing
inequalities
inequalities
24
The philosophy of development, growth with equity/balanced distribution is
integrated in all Malaysian development policies
24
Financial inclusion is one of a range of strategies to eradicate poverty
Healthcare
Eradicating poverty
Basic
requires access to Education
services
financial services & …
Housing
25
25
History of Microfinancing in Malaysia
For sources of microcredit,

people find engage in lending
Tabung Ekonomi Central Bank
from pawnshops, family and
Kumpulan Usaha (Amendment)
friends, and from
Niaga (TEKUN) Act 2009
moneylenders or ceti.
For savings, people kept their 1987 2006
money in cash or put them into
tangible assets such as gold,
jewellery and properties. They 1998 2009
also engaged in rotating
savings and credit associations,
ROSCAs or, more commonly Amanah Ikthtiar NSDC
known as, kutu. Malaysia (AIM) Microfinance
Institutional
Framework
26
26
Findings from a Census* in 2005 showed that there was an opportunity for
the formal financial system to serve the micro enterprises
Most establishments in Malaysia .. but only 13% indicated that financial

are micro enterprises .. institutions were their main source of
financing
• 99.2% of establishments in
Malaysia are SMEs Main Sources of Financing
• Total No. of SME Establishments: 10% 8% 7%
~548,000 6%
Others 10% 27%
31%
Medium 20%
2% (12k) Small
18% (100k)
37%
39% 23%
Friends &
Family 24%
44%
34%
Own 32%
Money 50%
Micro enterprises 43%
80% (435k)
26%
27
FIs 13% 16%
Micro Small Medium Large SMEs

Source: Census of Establishments and Enterprises 2005 , Department of Statistics Malaysia
27
Prior to 2006, micro financing was provided by Government sponsored
schemes ..
Micro financing Outstanding Micro financing Outstanding

End-2000 End-2005
TEKUN
24%
Govt. sponsored
TEKUN micro credit
24%
26% schemes
54%
74%
54%
22%
AIM
28
AIM
via National Savings Bank &
22%
Agriculture Bank
28
Financial institutions can benefit from offering microfinancing
Strength Weakness
• Ample liquidity in banking system • Existing procedures not tailored

to needs of micro enterprises
• Wide branch network
• Lack of products suited for
• Wide depositor outreach, source of micro enterprises
microfinance customers
• Low risk appetite for non
collateralised loans
Opportunity
Threat
• Attractive market currently served • Narrowing margins in existing
by shadow banking system
business lines
• Liberalised interest rate framework to
generate good return of equity (ROE)
29
• Internet and mobile technology

lower cost of outreach
29
Successful microfinance needs to overcome several challenges
Challenges Solutions
− Target group that is geographically dispersed
and have low financial literacy − Products that meet the needs of the
target customer i.e. easy, fast and
− Target group is averse to approaching
convenient
financial institutions
− High admin cost to serve the target customer − Pricing of products that incentivise
outreach
30
− Lack of economies of scale
− Leveraging on existing banking branch
infrastructure and that of strategic
partners
− Increased promotion and awareness

30
A sustainable microfinance mechanism needs to be in place to
complement the micro financing schemes by Government
Objective:
Objective:Enhance
Enhanceaccess
accessto tofinancing
financingto tomicro
microenterprises
enterprises
....by
byencouraging
encouragingfinancial
financialinstitutions
institutionstotoprovide
providesustainable
sustainablemicrofinance
microfinance
• To ensure micro enterprises has KEY PRINCIPLES TO ADOPT:

continuous access to financing to  Commercially driven with
support their business activities market based lending rates to
ensure sustainable operations
• To extend outreach to more micro  Funding should be self-
enterprises sustaining
 Crucial to have a well defined
• To ensure FIs are financially sustainable business model in place
31
31
The National SME Development Council (NSDC) approved a
comprehensive sustainable microfinance institutional framework in 2006
National Savings Bank (DFI)
Definition of Microfinance
Agriculture Bank (DFI)
• Financing up to RM50,000
Cooperative Bank (DFI)
(USD16k) to micro enterprises
for business purposes
Banking Institutions • Easy, Fast and Convenient

√ No collateral
Cooperatives √ Minimum documentation

√ Simple application procedures
√ Fast approval and disbursement
32
Leverage on existing infrastructure
32
Nine financial institutions rolled out micro financing products
2006
Incumbent Players After NSDC’s Approval on Framework
EONCAP Islamic BSN

Pinjaman Peribadi – i TemaNiaga in Mar ’07
TEKUN Pesara (3P) in Dec ’06
Tabung Ekonomi
Alliance
Kumpulan Usaha Niaga in Public Rakan Personal Financing-I in Jul ’07
Nov ‘98 PBMicro Finance in
Dec ’06 Conventional in Aug ’07
1987 2005 2007
1998
AMBank B. Rakyat CIMB
AIM BPM
AmMikro in Pembiayaan Mikro-i Xpress Cash
Skim Pembiayaan Modal Usahawan Tani
Feb ’07 (Modal untuk Financing-i
Ikhtiar in Sept ‘87 (MUST) in Sept ’05
Usahawan Koperasi in Sept ‘07
– MUsK) in Apr ’07
CIMB UOB
Xpress Cash Personal EasiCash
Loan in Aug ‘05 in Jul ’06
33
5th NSDC Meeting

(Approved Framework in Aug ’06)
33
The microfinance industry has grown
Micro financing Outstanding

End-2000 Micro financing Outstanding
End-2009
100% = RM151 m (USD45 m) 100% = RM2.4 bil (USD747mil)
9 Financial
Institutions TEKUN
TEKUN RM835mil
RM617 mil
26%
CAGR: 35.9%
26%
74% yoy 35%
AIM Govt
sponsored 12%
Schemes
RM295
34 mil
27%
AIM
RM647mil
34
Micro enterprises have benefited from micro financing by the 9 FIs
Microfinance clients outstanding Microfinancing outstanding (USD mil) Microfinance access points
Feb-10 58,271 22% Feb-10 197 25%

yoy
2009 1,868
yoy
RM634 mil
End-08 45,179
End-08 149 2006 913
RM478 mil
End-07 22,788
End-07 70
RM225 mil
End-06 10,081
End-06 26
RM84 mil
• Average financing size of RM10,200 (USD 3,188)

• Available at:
 1,868 access points, including outlets of35strategic partners
35
The steps taken to create a sustainable microfinance industry
Create
widespread
Design right awareness on the
product to meet availability and
Encourage FIs to needs of micros benefits of
provide microfinance
microfinance
36
36
BNM encouraged financial institutions to provide microfinance
• Diversify portfolios
Microfinance • Create new revenue streams
can be • Use excess liquidity profitably
profitable • High ROE business Activities
• Can charge rates to reflect costs
• BNM leadership organised
and led FI CEOs and
senior management on
• High competition in existing businesses study visits to successful
‘Blue ocean’ • Venture into uncontested market space
business microfinance institutions in
Indonesia & India
• Extensive branch network & resources • Provided microfinance

Competitive • Cost effective funding source from global case studies and
advantage deposit base information pack to the FIs
• Opportunity to form ‘smart partnerships’
to lower admin cost & enhance outreach • Frequent discussions with
(e.g. Felda, Pos, convenience stores) FIs
• Contribute to national economic

37
Enhance image development Promote competition to ensure

• Enhances image of bank benefits flow to micro
enterprises
37
Jointly designed the right product to meet the needs of micro enterprises
‘Easy, fast & convenient’
Value to
micros
Local moneylenders
Formal financial
institutions that provide
microfinance
Traditional banks that

offer various types of
products
Product
features
Low interest Safety Easy Fast Convenient
rates - No collateral
38 Fast approval & Widely accessible at
- Min documentation disbursement branches and other
- Simple procedures distribution channels
Market research
38
Key benefits of Pembiayaan Mikro
Easy, Fast & Convenient
• Loan size ranging between

RM500 to RM50,000
Small
• No Collateral
• Financing is offered to Financing
• Minimum documentation
micro enterprises Amount
• Simple loan procedure
Use for Key Benefits

Business of Easy
Purposes Microfinance
Convenient Fast
• Widely accessible 39 • Fast approval

• Fast disbursement
39
Financial institutions adopted diverse business models to provide micro
financing
Mass market Monoline
• Study visits
Microfinance
• Market research Business
Models
• Pilot tests
Cooperatives Distributor
network
40
40
Created the Micro Enterprise Fund to lower the financing cost to micro
enterprises in a responsible manner
Micro Financial
Micro
Enterprise Institutions
Enterprises
Fund (FIs)
• RM 200 million
revolving fund • Micro loans at reduced retail
financing rates but higher than
• Soft loan to FIs at a
SME financing rates to prevent
concessionary rate
leakages of assistance and
disincentive to remain small
• FIs carry credit risk to

encourage responsible credit
approval and monitoring practices
41
41
Various initiatives in promoting widespread awareness on the availability
and benefits of microfinance
• National Microfinance Logo
• Distribution of Microfinance flyers and

comparative table of microfinance product
features
• Advertisements / Interviews in TV, radio and

newspapers
• Information booths at exhibitions / roadshows
• Posters/Buntings of Microfinance
• Financial institutions own sales & marketing

42
42
A National Microfinance Logo to provide prominent identity and create
greater awareness on microfinance
• Branches of financial institutions that

offer microfinance displayed the logo
• Microfinance customers are encouraged

to display the logo at their business
premises
43
43 43
Rationale for the National Microfinance Logo
Wave-like formation at Smaller organisations

the outer ring denotes
the spread of wealth
and resources from
major organisations
to smaller
organisations
Colour GREEN
represents ‘life’
Major organisations 44
(e.g. FIs)
44
Microfinance logo displayed at financial institutions, strategic partners and
borrowers
1 2
3 4
45
(1) Financial Institution (2) Financial institution (3) Strategic partner (4) Customer
45
Distribution of multi-lingual microfinance flyers at strategic locations & via
direct mailing
46
46
Comparative table on the features of various microfinance products
47
47
Direct Mailing of Microfinance flyers to 397,209 micro enterprises
• Mailing addresses for micro

enterprises provided by
DOSM
• Printing and mailing of

materials outsourced to the
National Printing company
• Mailing materials consist of:

– Pembiayaan Mikro flyers
– Comparative table of all
Pembiayaan Mikro product
features
– SMS Survey to gauge
awareness level on Pembiayaan
Mikro
48
48
TV and radio commercials (Barber Shop)
49
49
TV and radio commercials (Tailor)
50
50
News articles & interviews on microfinance by Malaysian leaders
51
51
Microfinance articles featured in SME magazines
52
52 52
Information booths at exhibitions / roadshows
53
53 53
Information booths at exhibitions / roadshows
54
54
Microfinance Poster/Buntings
55
55
Continuous promotions and awareness programmes
SME Promotions and 2009 Jan-Feb 2010

Awareness Programmes
Radio advertisements 1,078 700
Above the line
promotion Advertisements in 40 5
newspapers / magazines
SME articles 26 -
Live radio and TV 6 2
interviews
SME Promotions and 2009 Jan-Feb 2010

Awareness Programmes
Mailing of Pembiayaan 400,000 -
Below the line Mikro flyers
promotion Distribution of SME 112,000 15,850
information materials
Outreach events 45 6
SME Financing Fairs and 3 -
state level dialogues
56
Outline
• Context:
SME financing
Micro financing
• Way Forward 57
57
Comprehensive mechanisms in place for consumer education and
protection
Avenues to seek Help & Redress Enhanced Disclosure
 Integrated Contact Centre: BNMLINK,  Transparency & disclosure requirements

BNMTELELINK, complaints management & advisory for banking & insurance products
section
 Complaint & SME advisory units at financial
Fair Market Practices
institutions
 Small Debt Restructuring Scheme (SDRS)  Market conduct requirements for market
players
 ABMConnect Toll Free Channel
 Credit Counselling & Debt Management Agency
(AKPK) Enhancing Financial Awareness
 Financial Mediation Bureau
 Structured consumer education
 Advisory services through the SMEInfo Portal programme e.g. websites & information
booklets
 Exhibitions / road shows
Financial Safety Net
58
 Distribution of promotional materials
 Malaysian Deposit Insurance Corporation  Mass media advertisements
58
BNM’s financial advisory services via BNMLINK & BNMTELELINK
(Integrated Contact Centre)
Tel: 1-300-88-5465 (LINK)
Services
Provide Facilitate in Mediate disputes Assist through

information on financial-related between SMEs Small Debt
sources of matters such as and financial Resolution
financing financing institutions Scheme (SDRS)
applications and for viable but
financing financially
restructuring / distressed SMEs
rescheduling
59
59
Many have benefited from the advisory and resolution services provided
BNM has assisted 253,801 clients in 2009

No of clients
For BNM:
Information
244,882
& guidance
• Majority (96.5%)
sought information
Debt mgt &
8,919
resolution
• 84% of cases related
to financing were
resolved
AKPK has assisted 36,848 clients in 2009
No of clients • 50% were resolved in
favour of consumers
Information
20,664
& guidance
Debt mgt &

16,184
resolution
Source: Bank Negara Malaysia and AKPK
60
The Small Debt Resolution Scheme
• Objective
• To assist viable but financially distressed
SMEs, by rescheduling & restructuring
• Providing a channel for SMEs to get assistance..

• Committee established to provide independent
assessments on applications rejected by
financial institutions
• Has assisted more than 690 SMEs to restructure their

financing (78% success rate)
• Encouraged banks to restructure financing under their
own schemes
• R&R more than doubled in 2008
• 2% of R&R under SDRS; 98% banks’ own scheme
61
• Provided discussion platform for bankers (SMEs with
financing from multiple banks)
61
Outline
• Context:
SME financing
Micro financing
• Way Forward 62
62
Moving forward, the financial sector is well positioned to support
and contribute meaningfully towards economic transformation
A new Blueprint for the financial sector is being developed for the next decade
Greater role of the financial sector as an enabler, catalyst and driver of growth
 Reinforce Malaysia’s position as an international hub for Islamic services through
accelerated development and promotion of Islamic finance
 Foster increased international linkages and regional integration

through enhanced presence of Malaysian financial institutions & development of the domestic
and regional financial markets
ENABLER CATALYST DRIVER
Continued intermediation Accelerate growth of Generate higher

of funds to support supporting and ancillary contribution to gross
economic activities services sectors domestic product
63
PROMOTE SOCIO-ECONOMIC DEVELOPMENT OF MALAYSIA

PRESERVE FINANCIAL SOUNDNESS & STABILITY
63
Goals of Malaysia’s New Economic Model
64
64
Lessons Learnt
 Important to have clarity of the desired end game
 Capability enhancement must be viewed in a comprehensive

manner (people, process, structure and technology) to achieve
improvements by design
 Developmental initiatives must be forward looking and pre-emptive

in nature.
 Change in culture must be undertaken to support transformation
 Behavioural change takes a long time
 Culture change must be embedded in the process & system (or

else, people will revert back to the old ways)
 Critical to put in place an effective performance measurement

system
65
 Co-ordination and collaboration with the Government is necessary
 Clear philosophy underlining future path and objectives
65
Useful links
• SME Info Portal • Financial Mediation Bureau (FMB)

• http://www.smeinfo.com.my • http://www.fmb.org.my/
• Bank Negara Malaysia (http://www.bnm.gov.my) • Credit Guarantee Corporation Malaysia

• BNMLINK - Berhad (CGC)
http://www.bnm.gov.my/bnmlink/index.htm • http://www.iguarantee.com.my/
• CCRIS – http://creditbureau.bnm.gov.my/ • SME Credit Bureau

• http://www.smecreditbureau.com.my/
• SME Corporation Malaysia
• http://www.smidec.gov.my/ • Credit Counselling and Debt Management
Agency
• Bankinginfo and Insuranceinfo • http://www.akpk.org.my
• http://www.bankinginfo.com.my
• http://www.insuranceinfo.com.my
66
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SME and Micro financing: Malaysia’s Experience
Presentation for the Financial Inclusion Advisors Programme
Kampala, Uganda
Development Finance and Enterprise Department

Bank Negara Malaysia
26 April 2010 67
67

SME and Micro Financing: Malaysia's Experience

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SME and Micro Financing: Malaysia's Experience

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SME and Micro financing: Malaysia’s Experience

Presentation for the Financial Inclusion Advisors Programme

Development Finance and Enterprise Department

1960 1970 1980 1990 2000

• A private-sector driven, • Government emphasised on • Post-crisis, Government • Policy thrust to develop

 Transformation into an upper

 Sectoral diversification into

• Commercial Banks • Insurance Intermediaries Offshore

Non-Bank Financial Intermediaries

• Money Market • Capital Market

Payments and Settlement Systems

• Total assets of financial system at end-2009 was RM2.8 trillion

• Banking system continues to be primary financial intermediary

No. of financial institutions in Malaysia (as at end 2009)

Strong key financial indicators Enhanced contribution of financial sector

Profitability Annual Growth 6.4% 4.4%

• More hands on approach to ensure efficient,

• Developmental role in charting direction and institutional

Principal objects Principal objects

• Promote monetary stability and a sound financial Primary functions

Category Ranking / Response Source

‘Getting Credit’ No. 1 for 3 years World Bank (Doing Business

‘Loans accounts per No. 5 Consultative Group to Assist

‘Financing from FIs’ 77% of respondents SME Corp (3rd Survey on

‘Obtaining Financing from 13

Financing Outstanding as at end-Feb 2010

BIs • More than 80% of total SME

Source: Bank Negara Malaysia, SME Corp and Securities Commission

SMEs’ share of business financing

Financing Outstanding by Sector

RM 120.4 b as at end-Feb 2010

Source: Bank Negara Malaysia

Central Credit Reference

Financing Schemes Guarantee Schemes

• BNM SME Funds • SME Assistance and Modernisation Facilities (RM1.2

• One-stop central database of credit-

More than 20,700 SME accounts approved RM11.0 bil approved

SME AGS 10.3 WCGS 7.0 (Fully utilised)

WCGS 5.3 SME AGS 2.1 (Fully utilised)

SAF&SMF 4.9 SAF&SMF 1.1 (Completed)

IRFGS 0.2 IRFGS 0.8

Source : CGC and Prokhas

PROMOTE BALANCED & EQUITABLE GROWTH

For sources of microcredit,

Most establishments in Malaysia .. but only 13% indicated that financial

Micro Small Medium Large SMEs

Micro financing Outstanding Micro financing Outstanding

• Ample liquidity in banking system • Existing procedures not tailored

• Internet and mobile technology

− Increased promotion and awareness

• To ensure micro enterprises has KEY PRINCIPLES TO ADOPT:

National Savings Bank (DFI)

Banking Institutions • Easy, Fast and Convenient

Cooperatives √ Minimum documentation

Leverage on existing infrastructure

EONCAP Islamic BSN

1987 2005 2007

5th NSDC Meeting

Micro financing Outstanding

100% = RM151 m (USD45 m) 100% = RM2.4 bil (USD747mil)

Feb-10 58,271 22% Feb-10 197 25%

• Average financing size of RM10,200 (USD 3,188)