SME Bank Malaysia Bhd is geared up to lift the small and medium enterprises (SMEs) to the next level in terms of financing with the nation moving into the endemic phase.
SME Bank’s total outstanding financing stood at RM7.9bil as of end-December 2021, an increase of RM600mil compared with 2020.
Group president and CEO Aria Putera Ismail tells StarBizWeek that the local economy is expected to gradually improve, supported by the opening of borders, ease of restrictions and improvement in global trade, coupled with the continued policy support and stimulus assistance by the government.
This will bode well for SMEs, he adds. For 2022, he says SME Bank is looking to support high impact as well as government focus sectors such as construction, healthcare, oil and gas, electrical and electronics, telecommunications, transport equipment, petroleum and chemical.
As of Jan 2022, the highest sectors which received financing from the bank are services (RM4.5bil) followed by construction (RM1.3bil) and manufacturing (RM1.2bil).
To further spur SME financing, he says the bank has been entrusted with a budget allocation of RM200mil under the Industrial Building System (IBS) Promotion Fund initiative and RM100mil under the Young Entrepreneur Financing programme for this year.
“The budget allocated for two years is to enable us to continue helping the targeted groups comprising graduates and IBS contractors to grow their businesses and ensure they are not left behind as we enter the endemic phase.
“SME entrepreneurs will also have the opportunity to increase their participation in national development activities on a larger scale through equity and quasi-equity funding initiatives worth RM600mil led by SME Bank in collaboration with Bumiputra Agenda Steering Unit and Bank Simpanan Nasional.
The budget allocated for two years is to enable us to continue helping the targeted groups comprising graduates and IBS contractors to grow their businesses and ensure they are not left behind as we enter the endemic phase. - Aria Putera Ismail
“In addition to these new allocations and the existing financing facilities, the proceeds raised from the sustainability sukuk which SME Bank successfully issued and registered a final order of RM1.78bil which translates to 3.56 times bid-to-cover ratio from the target issuance of RM500mil, will be utilised to finance new and existing eligible syariah compliant eligible environmental, social and governance (ESG) projects,” he says.
These projects are directly supporting 11 of the 17 United Nations Sustainable Development Goals, including green and social impact projects, notes Aria Putera.
The bid-to-cover ratio is an indicator of the demand for securities and bonds. A high ratio is an indication of strong demand.
SME Bank’s sustainability sukuk is inline with the government’s implementation of the third focus of Malaysia’s Budget 2022, namely a prosperous and sustainable Economy and the 12th Malaysia Plan to strengthen the country’s sustainability agenda.
SME Bank, being the first development financial institution to issue the sustainability sukuk is paving the way in transiting the domestic small and medium entrepreneurs to build sustainable futures on ESG, Aria Putera adds.
On digitalisation, he says despite the adverse impact to health and the economy, Covid-19 has also been a game changer in accelerating digital adoption amongst the local business community, including SMEs.
He adds that both small and big businesses, as well as the public sector, has re-strategise and invested in more integrated digital infrastructure to manage current and future disruptions.
They have to drastically adopt digital technology and transform as businesses change their operations to cope with office closures, restricted movement and supply interruption.
“Now is the best time for the SMEs to embrace IR 4.0 and execute their digital transformation journey.
“By embracing digital technology and everything it has to offer, SMEs are also able to strengthen relationships with existing customers, enhance the trust and gain mutual support while they explore and leverage new partnerships for business expansions,” Aria Putera says.
He views the trade agreements like the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership as a golden opportunity for local SMEs to penetrate and expand their business into participating countries.
“To this end, SME Bank will work closely with the government in facilitating financial assistance and export facilitation products and services such as export finance facilities, foreign exchange facilities, hedging mechanisms and trade finance facilities at attractive cost,” he says.
The bank will provide not only financial assistance, but also development expertise to SMEs for them to grow their businesses.
Together with its wholly-owned subsidiary Cedar, Aria Putera adds that the bank will continue to create and improvise new and existing beyond financing programmes. He says the aim is to increase the number of participants and discover potential SMEs to elevate them to the next level and ultimately become leading industry players.
The bank is currently running two flagship beyond financing programmes to assist SMEs in the export market. They are the Business Export Programme (BEP) and Project Titan.
BEP, which started in 2016, focuses on developing potential SMEs to become exporters through a three-year structured intervention programme. Participating companies will undergo intensive capacity building modules as well as participating in trade missions to explore and create more opportunities for their business in the international market.
Project Titan, which started in 2020, is an intervention and capacity building programme which aims to create successful SMEs as national and regional champions.
Under this project, export market access is one of the capacity building modules provided to the participating companies, in addition to other support such as funding access and business advisory.
Eleven companies have been chosen for the programme spanning from healthcare products and services, oil and gas services, logistics, technology and food and beverage. The five-year programme aims to achieve RM1bil valuation or 500% compounded annual growth rate per company by the end of the period.