The Malaysian Experience - Astana Economic Forum 2013

Report
SECTION 2:
The infrastructure to support the
development and expansion of foreign
economic activities of Kazakhstani SMEs
Development Financing of SMEs –
The Malaysian Experience
by
Mohamad Sabir Mohamad Sabri
SME BANK MALAYSIA
VI ASTANA ECONOMIC FORUM
Kazakhstan
23 May 2013
Overall Financial Landscape
 Comprehensive financial landscape for SMEs with diversified sources of
financing providers
 Banking institutions are the main source for SME banking – 90%
 DFIs are specialized institutions established and funded by the
government for strategic sectors
2
Perspective of DFIs in Malaysia
Role and functions in providing focused financial and development support to
bolster human CAPITAL development, SOCIO-ECONOMIC AGENDA and
economic growth
 DFIs are specialised FIs established by the Government with specific
mandate to develop and promote key sectors that are considered of
strategic importance to the overall socio-economic development
objectives of the country
 The strategic sectors include agriculture, small and medium
enterprises (SMEs), infrastructure, maritime, export-oriented sector
as well as capital-intensive and high-technology industries
 The are 13 DFIs in the country of which 6 are prescribed under the
Development Financial Institutions Act 2002 and supervised by the
Central Bank
3
Unique Individual Mandate
DFI
MANDATE
Development Bank of Malaysia (Bank
Pembangunan Malaysia Berhad)
Providing financial services focusing on capital intensive
industry ie. infrastructure projects, maritime & hi-tech sector
SME Bank Malaysia (Bank Perusahaan
Kecil & Sederhana Malaysia Berhad)
Providing financing and advisory services activities to SMEs
involved in manufacturing, services and construction sectors
Export-Import Bank of Malaysia Berhad
(EXIM)
Providing facilities to support exports & imports of goods,
services and overseas investments
Agro Bank Malaysia (Bank Pertanian
Malaysia Berhad )
Providing full range of financial services focusing on
agricultural sector
Co-operative Bank (Bank Kerjasama
Rakyat Malaysia Berhad)
Provide financing and accept deposits as well as producing
satisfactory dividend for its members (co-operative)
National Savings Bank (Bank Simpanan
Nasional)
To encourage savings, investments and smart financial
management among Malaysians to increase quality of life
The remaining 7 entities which are not governed by the Central Bank have their
own respective specific mandates
Government’s Agenda – 10MP and ETP
SME Growth vs. GDP Growth (2001-2011)
In efforts to promote
Malaysia as a high-income
nation by 2020, the
Government targets to grow
SME industry’s contribution
to the nation’s GDP to 41% in
2020.
6.0e
5.1
Total SME contribution to GDP (2011-2020)
SME Bank will
provide
funding
assistance to
businesses
that are in the
Development
and Growth
stage
45%
40%
35%
33%
33%
34%
35%
2011
2012
2013
2014
38%
38%
40%
37%
39%
36%
2015
2016
2017
2018
2019
2020
30%
25%
20%
15%
10%
5%
0%
5
Government’s Agenda - SME Master Plan (2012-2020)
 The Master Plan charts the policy direction of SMEs in all sectors through the year 2020
towards achieving a high income nation in line with the New Economic Model (NEM)
 Phase I: new SME Development Framework and broad policies and strategies to
achieve the NEM goals;
 Phase II: Master Plan is to look into the specific action plans and the monitoring
mechanism
Raise
productivity
Increase
business
formation
Innovation and
technology
adoption
Access to
financing
Legal and regulatory
environment
Strategic Goals
Focus Areas
Expand number
of high growth
and innovative
firms
Infrastructure
Intensify
formalisation
Human capital and
entrepreneurship
development
6
Access to
market
SME Bank Malaysia – Vision and Mission
&
To Be A Full-Fledged
Specialised Financial Institution
To Nurture Small Medium
Industry Enterprise For Nation
Building
To Support Government’s
Economic Agenda In
Developing SMEs As An
Engine Of Growth
7
Shareholding and Reporting Structure
Supervising
Ministry
MITI
Shareholder
100% owned
MOF Inc.
Regulator
Under DFIA 2002
Central Bank
of Malaysia
SME Bank
Malaysia
SME Financing
• Manufacturing sector
• Services sector
• Construction sector
• Authorized Capital RM5.0 billion
• Paid up Capital RM1.35 billion
8
Main Roles – Integrated Approach
Banking
Financial assistance
serves as enabler
for SMEs, as
engine of growth, to
move up the value
chain and create
viral effect to
the economy
INTERVENTION
FINANCING
Hand-holding
approach from
the entry point
to inculcate business
acumen and propel
SME business
to the next level
High Impact Developmental
Program Through
Synergized Approach of
Financial Assistance
and Intervention
Small Medium Enterprises (SMEs)
MICRO
SMALL
9
Development
MEDIUM
Industry Focus
Islamic
10
Business Model
SME 1
Desired Outcomes:
SME 2
NEED
Based
Cash Flow and
Development
Strength
SME 3
SME 4
SME 5
MERIT
Based
SME 6
Development Investment to
target, Contribution of
Ecosystem in Target Economic
Sectors, GDP contribution of
SME, Market Share
Government
Fund
Financing and
Intervention;
Partnership
Desired
Outcomes:
Risk and
Financial
Strength
Market Fund
Sustainability,
Development
Impact
BUSINESS MODEL TO SUPPORT GROWTH
SMEs Ecosystem
Target Market
Need Based SMEs
Merit Based SMEs


11
Nurturing &
Intervention
Product Terms
Risk Parameters


Program-Managed
Lending (PML)
Source of Funds
Pricing
Source of Funding
GENERAL
 From shareholders’ contribution
 Internally generated funds
GOVERNMENT
 Sourced from Government Loans
 Loans arranged by Government with
Domestic or Foreign Fund Providers
MARKET
 Sourced from the market – via
corporate deposits and/or
bond/sukuk issuance
12
Type of Financing
• Land
• Building
• Machineries
• Equipments
• Motor Vehicle
• Fixed
• Revolving
WORKING
CAPITAL
FIXED ASSET
• Bai’ Bithaman Ajil
• Bai’ Istisna’
• Ijarah
• Ijarah Thummal Bai’
• Bai’ Murabahah
• Bai’ Dayn
• Bai’ Inah
• Kafalah
13
Entrepreneur Premise Program
25 Complexes/434 Lots
Financing
Facilities
Matching Grant
for Technical &
Training
Advisory
Services
14
Entrepreneurship
Training
Entrepreneurial Training
Type
Basic Training
Intensive Training
TRAINING
SMEs Performance
Enhancement
Training
Islamic
Scope
New Customer
Orientation Training
EPC Participants
SME Bank’s Existing
Clients
Existing/Would-be
Entrepreneurs
Establishment of Centre for Entrepreneur Development &
Research (CEDAR)
• To support SME Bank’s role in the area of human capital
development i.e. providing capacity building & capabilities
enhancement for SMEs
15
A Changing Scenario of Development Financing
Government’s Budgetary
Constraint
• DFIs have been forced to become less dependent as
Government face more budgetary constraints and
development aid declines
• To use own financial strength to intermediate between
the providers and users of capital
• To improve Balance Sheet to enhance attractiveness of
capital
Complementary Function
• Developmental role or development assistance is often
non-recoverable but complements development
banking, thus, both functions become mutually
reinforcing
• The functions are bundled together since the skills
required for assessing potential investments are
similar to those required to address capacity building
and other development needs
16
On-Going Challenges – Balancing Act
 DFIs are required to be self sustaining, and must increasingly raise
funds independently, with or without government guarantees;
 Need to pay special attention to the entity rating and adopt
prudent risk management policies and practices;
 DFIs would end up prioritising their financing activities and certain
high risk segments of the market would left unserved ;
 Careful balance must be struck between investments with high
returns and less secure or secured but attractive in pursuit of
Government’s development agenda ; and
 Balance set of skills to enhance understanding of both Banking &
Business capability
17
Development Financing – Conclusion
 For DFI to succeed within the rapidly changing
environment, they must meet the challenges for an
effective management;
 Requires sound governance and financial management,
flexibility and the ability to balance cost-effective
intermediation and risk management with outreach
through smart partnerships, capacity building and
knowledge management;
 DFIs need to sufficiently generate income through
diversification of income stream which could be used to
cross subsidize its developmental role
18
For business. For growth. For life.
http://www.smebank.com.my
or contact
[email protected]

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