credit access in Malaysia
Malaysia is a rapidly growing economic country with only 0.6 percent of its population living below the poverty line. The country’s economy is largely dependent on Small to Medium Enterprises (SMEs), which comprise 36 percent of the gross domestic product (GDP) and also provide employment to 65 percent of the population.

Despite this success, however, financial institutions were reluctant in granting loans to SMEs, thereby making credit access in Malaysia difficult. The reasons behind these barriers include a lack of:

  • collateral to secure loans
  • capacity to borrow money
  • insufficient knowledge & track record of business


Small to Medium Enterprises

SMEs are important for Malaysia’s growth and development as these organizations represent almost 97 percent of the country’s business establishment; such enterprises therefore provide a vital source for job creations. Sometimes these small businesses start as an idea from a few people investing their own money or borrowing from friends and family.

With success, extension of businesses become inevitable and then require money to hire new people, develop new products and facilitate other business necessities. Due to this chain, the administration came up with ideas to ease the process of credit access in Malaysia.


Credit Guarantee Corporation

Credit Guarantee Corporation (CGC) of Malaysia with their 45 years of experience came with a wide variety of schemes for supporting SMEs. Some of them are Biz-Mula for Malaysian start-up companies, Biz-Wanita for women headed enterprises, Green Technology Financing Scheme (GTFS) for supporting sustainable energy and also other schemes for indigenous Malaysians.

The CGC schemes cover almost 50 to 90 percent of the risks of granting loans in exchange for a 2 to 3.5 percent fee; this coverage thus makes credit access in Malaysia accessible for many small to medium business organizations. The scheme is properly designed and verified so as to be accepted by the banks in Malaysia.


Benefits for Small and Medium Enterprises

Biz-Mula is a direct financing scheme for small businesses less than four years old. These schemes utilize Bank Negara Malaysia (BNM) for the funding of SMEs. With certain eligibility and restriction criteria, the financing amounts range from 30,000 to 300,000 Malaysian roubles (RM).

Biz-Wanita scheme is the same as Biz-Wala except it only funds women entrepreneurs; both Biz-Mula and Biz-Wanita work for all economic sectors, except primary agriculture and micro-enterprises.

The GTFS provides opportunity for green investments by offering a 60 percent guarantee on the financing amount and a 2 percent discount on the interest or profit rates. This scheme was accessible from both private and commercial financial institutions till December 2017; this support greatly helped in the expansion of the green technology sector.

Pembiayaan Mikro scheme provides financing for up to 50,000 RM without collateral to micro enterprises who oftentimes lack credit history. The scheme can also offer lower-rate finance through BNM’s Micro Enterprise Fund.


Benefits from Foreign Direct Investments

Foreign Direct Investments (FDI) in Malaysia ranged between $9 to $12 billion during the years of 2010 through 2017. According to the data gathered from the  Malaysian Investment Development Authority (MIDA), the majority of these investments stem from China, Japan, the Netherlands and the U.S. Generally, the funds originate from the service, mining, manufacturing and construction fields, and come with a promise of almost 61,930 job opportunities through 2,294 projects.

Malaysia is a country where credit access has been strategically eased for business growth through the lowering of collateral requirements, longer-term loans and lower interest rates. These changes were possible by joint initiatives from both the administration and financial institutions and hopefully will continue to be effective and helpful to the people of Malaysia.

– Mahua Mitra

Photo: Flickr