Presentation on theme: "Jordan Loan Guarantee Corporation – SME Financing and Loan Guarantee Conference 2014 Central Bank’s Programmes Supporting SME Financing Marina."— Presentation transcript:
1 Jordan Loan Guarantee Corporation – SME Financing and Loan Guarantee Conference Central Bank’s Programmes Supporting SME Financing Marina Kahar Director of Development Finance and Enterprise Department Bank Negara Malaysia 25 November 2014
2 Coverage of presentation Strategic importance of SMEs to the economyBuilding the SME financing eco-system: A Malaysian perspectiveMalaysia’s holistic approach towards SME policy interventionsPromoting and supporting innovation and new growth areasDevelopment of a supportive payment system to drive innovative businessesProportionate regulation to drive SME developmentConclusionMy presentation today will cover the following areas:
3 SMEs are an important contributor to the Malaysian GDP GDP Growth: SMEs and Overall EconomySME GDP growth outpaced the overall economy (cumulative growth of 6.3% for )Contribution to GDP increased by 3.7 ppt since 2005Services sectors remain as the largest contributor to SME growthBanking system remains supportive of SMEs, in all key economic sectorsp: preliminary f: forecastLending to SMEs by Banking System (RM b)Source: Department of Statistics, SME Corporation Malaysia, Bank Negara Malaysia
4 Contribution of SMEs to the Economy While SMEs rank high in terms of participation, there is still great potential to contribute more in terms of value creation98% of registered business establishments are SMEsMicro enterprises constitute the largest sub group of SMEs and a key source of income and self- employment for the low-income households90% of SMEs operate in the services sectors (value: RM202.4 billion or USD60.2 billion), in line with the country’s growth path as a services-oriented economyContribution of SMEs to the EconomyDespite its size, SME GDP contribution is only 1/3 of total GDPPartly due to lower productivity and lower number of high growth firms compared to larger enterprisesMacro policies must therefore focus more on ramping up SME sector’s contribution to GDP through high value-added activities. This requires an unconventional approachTerdapat sebanyak 580,985 PKS dalam sektor perkhidmatan, di mana 462,420 atau 79.6% merupakan perusahaan mikro.Source: Department of Statistics, SME Corporation Malaysia4
5 Enhancing Access to Financing Policy interventions are driven holistically, under a single driving forceNational SME Development Council (NSDC)High level champion to drive broad policies and strategies for comprehensive development of SMEsBuilding Capacity and CapabilityEnhancing Access to FinancingStrengthening Enabling InfrastructureEntrepreneur DevelopmentHuman Capital DevelopmentAdvisory ServicesProduct DevelopmentTechnology EnhancementMarketing and PromotionAwareness and OutreachPhysical InfrastructureRegulatory InfrastructureInformation InfrastructureAn ‘Inclusive Financial System’ is mandated as a primary objective in the Central Banking Act (Revised) 2009Start-UpsBusiness ExpansionRehabilitation
6 The SME Masterplan 2012-2020 has outlined 4 goals and 6 focus areas - The ‘Game Changers’ to increase SMEs’ contribution to the economyThe SME MasterplanAccess to financing as an important lever to influence performance of SMEs, which requires support from the central bank
7 BNM’s commitment in financial inclusion embedded in legislation and financial sector blueprint 1Revised Central Bank Act 2009Principal ObjectivePromote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economyPrincipal FunctionsFormulate and conduct monetary policyPromote exchange rate regime consistent with fundamentalsRegulate and supervise financial institutionsPromote sound, progressive and inclusive financial systemProvide oversight over the money and foreign exchange marketHold and manage foreign reserves of MalaysiaIssue currencyExercise oversight over payment system2Financial Sector Blueprint (FSBP)Enhance capability to support high value-added activitiesIncrease supply of a broad range of private risk capital fundingImprove access to informationEnhance access to financing for micro enterprises7
8 The creation of SME financing ecosystem underpinned by five main pillars Microfinance Institutional FrameworkStrengthening the Development Financial InstitutionsCentral Credit Reference Information System (CCRIS)Credit Guarantee Corporation Credit Bureau MalaysiaSME Financing Facilitation (ABM- PARTNER)SME Financing EcosystemFinancial InfrastructureBNM’s SME FundsCGC Guarantee SchemesVenture CapitalFinancing for new growth areasGreen Technology Financing SchemeFinancial inclusion and education28 programmes in 2014SME eventsMedia promotionsDistribution of promotional materials through local authoritiesOutreach & Awareness ProgrammesFinancing & Guarantee SchemesBNMLINK, BNMTELELINK, MOBILELINKFinancing Help Desks at SME Business AssociationsABMConnectBankinginfo & SMEinfoComplaint & SME Advisory Units at FIsDebt Resolution & ManagementAvenues to Seek Information & RedressSmall Debt Resolution SchemeCredit Counselling & Credit Management
9 More than USD1.8 bil in financing assistance provided Collaborative approach between BNM and Government agencies to support innovative and new growth areasCreating a stable environment to spur innovation and growthExamples:Assessment tools by experts to complement credit assessment by FIsGreen Technology Financing Facility (USD1.06 bil) comprising of 30 actively participating FIsCommercialisation Innovation Fund (USD0.15 bil)1IP Financing Scheme by MDV and CGCProducts and Services2Green Tech certificationTechnical Assessment by ExpertsMore than USD1.8 bil in financing assistance provided4Capacity Building3Business matching with financial institutionsConference on Green Technology Financing and IP FinancingBusiness Facilitation/ Market PlatformIP Marketplace by Malaysia Intellectual Property Corporation (MyIPO)Technical briefings by MDeC and Biotech CorpGreen Tech Business Review by Malaysia Green Tech CorporationSeminar on Intellectual Property Awareness by the Intellectual Property Corp of MalaysiaTechnology Commercialisation Platform to assist in end-to-end R&D&C by Agensi Inovasi MalaysiaGT Financing Programmes by Asian Institute of Chartered Bankers
10 The evolution of Credit Guarantee Corporation’s role 1972 – 2000:Paving the path for FIs to lend to SMEs2000 – 2005: Address needs of SMEs in changing environment2005 and beyond: Perform social mandate sustainablyProvide guarantees to banks, to increase receptiveness of SME customersConcessionary guarantee fee to keep borrowing cost lowExpanded branch network nationwideImplemented Direct Access Guarantee SchemeEnhanced advisory services to SMEsAchieve financial sustainabilityExpand products and services to meet evolving needs of SMEsBalance financial sustainability with developmental roleKey roles of CGCRole of BNM in ensuring sustainable performanceProvides guarantee for loans without collateral / with inadequate collateral and track recordProvides advisory services such as financial management .Provides direct financing for specific segments such as start-upsImplements Government-funded schemes targeting specific sectors such as innovative and new growth areas.As a major shareholder, BNM initiated transformation plan for CGC to undertake more effective role in assisting viable SMEsGreater emphasis on enhancing outreach, while maintaining financial sustainabilityClose engagement with CGC’s Board to ensure effective performance and achievement of mandateClose monitoring through regular reports submitted by CGCSMEs benefitted from CGC schemes422,585Total value of loans guaranteedRM52.9 billion
11 Advancing financial inclusion via acceleration of migration to e-payments 2651979E-payments per capitaCheques cleared (‘mil)Card Terminals(per 1,000 inhabitants)2001002013202025Debit card transactions per capita30BNM Financial Sector Blueprint TargetsKey initiatives to accelerate migration to e-paymentsInitiativesBenefits to SMEsPricing reformsAffordable e-payment feeePIF frameworkIncentives to adopt e-paymentsImproved e-payment servicesPayment card reformsAffordable card acceptance costIndustry-wide effort to expand card usage and acceptanceJomPAYMore efficient bill payment servicesAdoption of e-payments would benefit SMEs by enhancing efficiency and productivity.BNM’s 3-pronged approach to create the enabling environment to spur SMEs to adopt e-payments.Address price distortions to make e-payments more affordableEnhance e-payment infrastructure to improve accessibility, security and conveniencePromote greater awareness and confidence in the use of e-paymentsWith risk and cost minimisation outcomes embedded in the policy design.
12 Barriers for SME growth Continuous efforts undertaken to address challenges in SME developmentBarriers for SME growthHigh cost of doing businessUncompetitive / low productivityLower profitsDifficulty obtaining fundingLow expansion opportunityBusiness / Entrepreneurial impedimentsFinancing issuesLow innovation and technology adoptionHigh Transaction CostsInformation AsymmetryMarket access – lack marketing and branding knowledgeLack Collateral / Track RecordsHuman capital – skill mismatch of workforceSource: Bank Negara Malaysia; SME Corporation Malaysia
13 Balanced regulatory approach adopted for SME development - Balancing between regulatory expectations and developmental agendaRegulators’ Dilemma:FinancialStabilityDevelopmental AgendaIntended Outcomes:Effective intermediation through prudent lendingReduce risk of institutional failureInstitutional safety and soundnessIntended Outcomes:Support economic transformation objectivesGreater risk-taking on financing innovationEnhance financing access to underservedApproach to Balance the Conflicting Agenda:Principle-based RegulationRegulations not prescriptiveFlexible and encourage pioneeringRecognises individuality of regulateesE.g. priority sector lending, microfinance, agent bankingMinimise Information AsymmetryCCRIS – assists FIs ascertain behaviour of applicantsCredit Bureau Malaysia – independent credit ratings on SMEsRisk-sharing with CGC for lending to SMEs and targeted sectorsProportionate RegulationPhased implementation through pilot initiativesDFI Act – balancing mandate achievements and sustainabilityAFI platform – Global Standards Sub-committee and Global Proportionality Working Group123
14 Continuous surveillance and oversight over SMEs’ performance and access to financing Pro-active measures taken by BNM for effective surveillance to ensure continued access to financingRobust surveillance and oversight over market practices and new products offered by financial institutions.Keep abreast of new emerging risks and vulnerabilities for timely identification and mitigation of risks.Ensure compliance by FIs with regulatory requirements on the offering of new financial products and services particularly management and control of risks.Continuous engagements with FIs, SMEs, Government agencies and business associations on challenges faced by SMEs to address their concerns.Perform assessment through demand side survey on SMEs to facilitate formulation of policies to support the growth of SMEs.
15 In conclusionCollaborative efforts among stakeholders must be championed by a higher voice to harmonise conflicting objectives – ecosystems need all parts to work cohesively.The Central Bank needs to strengthen SME market surveillance and promote a market-driven approach to encourage industry players in enhancing SMEs’ access to financing.The awareness level of financiers needs to be accelerated in order to increase understanding of the new growth areas and the associated risks.Innovation leads to growth and ultimately prosperity but financial stability must not be compromised.All stakeholders including the Government and the Central Bank must continuously enhance the eco-system to support SME growth.