The National Small and Medium Enterprise Development Council convened its eighth meeting today and endorsed several key initiatives to promote a competitive and resilient small and medium enterprise (SME) sector. Chaired by YAB Prime Minister, the Council comprises 16 Members of Cabinet and Heads of 3 Agencies involved in SME development. The Council formulates the broad policies and strategies, and oversees coordination to enhance the effectiveness of Government programmes for SME development.

•  More than 286,000 SMEs assisted through development programmes in 2007

The Government has accorded significant emphasis towards the development of SMEs to enhance their viability and contribution to the economy. The initiatives implemented in 2007 have yielded positive results. More than 286,000 SMEs were assisted through the implementation of 189 key development programmes, involving a total expenditure of RM4.9 billion. This also included a total of 135,000 SMEs, women entrepreneurs and students who benefited from entrepreneurship and technical training, while m ore than 4,750 SMEs were provided with business premises and factories.

With the adoption of the SME Blueprint Management Framework, SME development programmes have become more focused and effective, with greater collaboration between the Ministries and Agencies involved. About 75% of the programmes implemented in 2007 had met or exceeded the expected outcome. The other programmes are on-going and remain on track.

•  Financing channeled to SMEs by financial institutions have exceeded 2007 targets: RM63.2 billion financing approved to more than 132,000 SME accounts

In 2007, a total of RM63.2 billion financing was approved to more than 132,000 SME accounts by banking institutions and development financial institutions. This exceeded the initial 2007 target of RM51 billion financing approvals to 110,000 SME accounts. At end-March 2008, SME financing outstanding provided by the financial institutions amounted to RM132.4 billion, accounting for 44.3% of total outstanding business financing. The quality of SME financing has also improved, with SME gross non-performing loan ratio declining to 9.1% from 11.1% in the last year.

On a sectoral basis, financing to SMEs has become more diversified. Significant growth was seen in financing outstanding to the primary agriculture sector (14.6%), while a large percentage of financing (46.8%) was channeled to SMEs in the services sectors, particularly to SMEs involved in wholesale and retail trade, restaurants and hotels.

The Government and Bank Negara Malaysia implemented several measures to enhance access to financing by SMEs and microentrepreneurs. Following the launch of the National Microfinance Logo in October 2007 which resulted in increased awareness on microfinance as a financing option, over 26,000 micro enterprises have benefited from microfinance provided by nine financial institutions. Micro financing outstanding increased to RM271 million as at end-March 2008. Bank Pertanian Malaysia, now Agro Bank, has also been corporatised with a paid-up capital of RM1 billion to enhance its capacity to provide adequate financing access to SMEs in the agriculture and agro-based sectors. These SME financing initiatives are reinforced with financial advisory services at Bank Negara Malaysia and the financial institutions under its purview.

•  National SME Development Blueprint 2008: 198 key programmes with financial commitment of RM3.2 billion to assist SMEs in 2008

The National SME Development Blueprint 2008 includes 198 key SME development programmes and are currently being implemented in 2008 with a financial commitment of RM3.2 billion. These programmes will assist SMEs across all economic sectors, in the areas of enhancing the supporting infrastructure for SMEs, capacity building to strengthen SMEs, and in improving access to financing. The main focus for 2008 will be to promote SMEs in the services, primary agriculture and agro-based sectors, in line with strategies formulated in RMK9 and IMP3.

The key programmes in capacity building are focused on entrepreneurship and human capital development, marketing and promotion and provision of advisory services to SMEs. Enhancing entrepreneurship programmes for the distributive trade and other strategic sectors involves the upgrading of entrepreneurial skills for 75,000 SMEs in 2008. Through the implementation of Advisory and Guidance Services, SME Expert Advisory Panel and Technology Awareness and Advisory programmes, more than 38,000 SMEs across all sectors will have better access to advisory services provided by the various Ministries and Agencies.

In providing the supporting infras tructure to SMEs, the Government will provide more business premises, factories, business stalls and incubation centres for SMEs. These include the establishment of Halal Parks and centres for packaging, distribution and marketing of agriculture products (PUSPRO) at strategic locations.

In the area of financing , banking and development financial institutions are expected to approve a total of RM70 billion financing to 140,000 SME accounts in 2008. As at end-March 2008, the banking and development financial institutions have approved RM13.3 billion to more than 38,000 SME accounts. This will be complemented by other Government financial assistance programmes that includes the Rural Economy Funding Scheme and the Franchise Financing Scheme.

To further increase the avenues for SMEs to obtain financing , the SME Credit Bureau is being established by the Credit Guarantee Corporation Berhad (CGC). The SME Credit Bureau operates as a comprehensive SME information centre offering credit reports and credit ratings, as well as SME and industry reports. These efforts will facilitate SMEs in obtaining financing at more favorable terms in a shorter period of time and enhance SMEs' competitiveness by inculcating a healthy credit culture amongst them.

•  Formation of dedicated SME Central Coordinating Agency (SME Agency)

The framework for the formation of a dedicated SME Central Coordinating Agency (SME Agency) was finalised at the meeting. This dedicated SME Agency represents a major structural enhancement to the SME development agenda. The SME Agency is a one-stop agency that will undertake the overall coordination of SME policy formulation and assessment of the performance of SME development programmes across all sectors. Ministries and Agencies involved in SME development will continue to oversee the SME policy formulation and programme implementation in accordance with their respective mandates. The SME Agency will serve as the central point of information, reference and advisory services for SMEs across all sectors and will also assume the role of Secretariat to the National SME Development Council, which has been undertaken by Bank Negara Malaysia since 2004.

•  Moving SMEs towards higher value-added economic activities

On the measures to spur development of knowledge-based SMEs (K-SMEs) and to accelerate the move of SMEs towards higher value-added industries, the Council agreed that K-SMEs are defined as:

• SMEs with more than 20% of its staff being knowledge workers (where they possess at least tertiary / professional education). This includes consultancy firms.
• SMEs that directly use ICT and technology in business processes or for product improvements
• SMEs that adopt innovation and R&D in business processes or for product improvements
• SMEs that provide systematic training and learning of technical skills to their employees

K-Sectors will include Biotechnology, Nanotechnology, Photonics , ICT , Renewable Energy , Aerospace, and Advanced Materials.

The Multimedia Development Corporation and Biotech Corporation under the Ministry of Science, Technology and Innovation will be responsible for nurturing and monitoring the performance of K-SMEs. It was decided that comprehensive policies and incentives, that include fiscal incentives, access to capital and financing, facilitating quicker intellectual property and patent registration, as well as priority access to government procurement for innovative Malaysian SMEs would be implemented to further this agenda. Technology funds are also made available to enable K-SMEs to improve their research capabilities.

•  Special Committee to Recommend Measures to Reduce Impact of Rising Prices on SMEs

The Council agreed to the setting-up of a Special Committee to recommend appropriate measures to reduce the impact of rising costs and oil prices on SMEs. Measures to be considered include tax incentives to encourage SMEs to upgrade their machineries and equipment, as well as for technology adoption, implementation of development programmes to enhance capabilities of SMEs and reduce their operational costs, and, to enhance awareness and understanding on existing SME development programmes and financial assistance schemes.

Secretariat
National SME Development Council
2 June 2008