Central Bank of Malaysia - Jordan Loan Guarantee Corporation

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Jordan Loan Guarantee Corporation –
SME Financing and Loan Guarantee Conference 2014
Central Bank’s Programmes Supporting SME Financing
Marina Kahar
Director of Development Finance and Enterprise Department
Bank Negara Malaysia
25 November 2014
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
Coverage of presentation
•
Strategic importance of SMEs to the economy
•
Building the SME financing eco-system: A Malaysian perspective
•
Malaysia’s holistic approach towards SME policy interventions
•
Promoting and supporting innovation and new growth areas
•
Development of a supportive payment system to drive innovative businesses
•
Proportionate regulation to drive SME development
•
Conclusion
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
SMEs are an important contributor to the Malaysian GDP
GDP Growth: SMEs and Overall Economy
• SME GDP growth outpaced the overall
economy (cumulative growth of 6.3% for
2006-2013)
p: preliminary
f: forecast
Lending to SMEs by Banking System (RM b)
• Contribution to GDP increased by 3.7 ppt
since 2005
• Services sectors remain as the largest
contributor to SME growth
• Banking system remains supportive of
SMEs, in all key economic sectors
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
Source: Department of Statistics, SME Corporation Malaysia, Bank
3 Negara Malaysia
While SMEs rank high in terms of participation, there is still great potential to contribute
more in terms of value creation
% of Total Establishments
Medium
3%
• 98% of registered business establishments are
SMEs
Large
3%
• Micro enterprises constitute the largest sub group of
SMEs and a key source of income and selfemployment for the low-income households
Small
19%
• 90% 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
economy
Micro
75%
Contribution of SMEs to the Economy
62
41
59
25
32
19
GDP
Exports
Employment
2010
2020 (TARGET)
• Despite its size, SME GDP contribution is only 1/3 of
total GDP
– Partly due to lower productivity and lower number
of high growth firms compared to larger
enterprises
• Macro policies must therefore focus more on ramping
up SME sector’s contribution to GDP through high
value-added
activities.
This
requires
an
unconventional approach
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
Source: Department of Statistics, SME Corporation4 Malaysia
Policy interventions are driven holistically, under a single driving force
National SME Development Council (NSDC)
High level champion to drive broad policies and
strategies for comprehensive development of SMEs
• Entrepreneur
Development
• Human Capital
Development
• Advisory
Services
• Product
Development
• Technology
Enhancement
• Marketing and
Promotion
• Awareness and
Outreach
• Physical
Infrastructure
• Regulatory
Infrastructure
• Information
Infrastructure
Enhancing
Access to
Financing
An ‘Inclusive Financial System’ is
mandated as a primary objective in the
Central Banking Act (Revised) 2009
• Start-Ups
• Business
Expansion
• Rehabilitation
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CENTRAL BANK OF MALAYSIA
5
The SME Masterplan 2012-2020 has outlined 4 goals and 6 focus areas
- The ‘Game Changers’ to increase SMEs’ contribution to the economy
The SME Masterplan 2012-2020
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CENTRAL BANK OF MALAYSIA
Access to financing as an important lever
to influence performance of SMEs, which
requires support from the central bank
BNM’s commitment in financial inclusion embedded in legislation and financial sector
blueprint
1
Revised Central Bank Act 2009
Principal Objective
Promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy
Principal Functions
• Formulate and conduct monetary policy
• Promote exchange rate regime consistent with
•
•
fundamentals
Regulate and supervise financial institutions
Promote sound, progressive and inclusive
financial system
2
• Provide oversight over the money and foreign
•
•
•
exchange market
Hold and manage foreign reserves of
Malaysia
Issue currency
Exercise oversight over payment system
Financial Sector Blueprint (FSBP)
Enhance capability
to support high
value-added
activities
Increase supply of
a broad range of
private risk capital 7
funding
Improve access to
information
Enhance access to
financing for
micro enterprises
7
The creation of SME financing ecosystem underpinned by five main pillars
• Microfinance Institutional
Framework
• Strengthening the Development
Financial Institutions
• Central Credit Reference
Financial
Information System (CCRIS)
Infrastructure
• Financial inclusion
and education
• 28 programmes in
2014
• SME events
• Media promotions
• Distribution of
promotional materials
through local
authorities
Outreach &
Awareness
Programmes
• Small Debt
Resolution Scheme
• Credit Counselling
& Credit
Management
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
SME
Financing
Ecosystem
Debt
Resolution &
Management
• Credit Guarantee
Corporation Credit
Bureau Malaysia
• SME Financing
Facilitation (ABMPARTNER)
Financing &
Guarantee
Schemes
Avenues to
Seek
Information &
Redress
• BNM’s SME Funds
• CGC Guarantee
Schemes
• Venture Capital
• Financing for new growth
areas
• Green Technology
Financing Scheme
• BNMLINK, BNMTELELINK,
MOBILELINK
• Financing Help Desks at SME
Business Associations
• ABMConnect
• Bankinginfo & SMEinfo
• Complaint & SME Advisory
Units at FIs
Collaborative approach between BNM and Government agencies to support innovative
and new growth areas
Creating a stable environment to spur innovation and growth
• Assessment tools by experts to complement
credit assessment by FIs
Examples:
• Green Technology Financing Facility (USD1.06
bil) comprising of 30 actively participating FIs
• Commercialisation Innovation Fund
(USD0.15 bil)
1
• IP Financing Scheme by MDV
and CGC
Products and
Services
4
• Conference on Green
Technology Financing and
IP Financing
Capacity
Building
• Technical briefings by MDeC
and Biotech Corp
• Seminar on Intellectual Property Awareness by
the Intellectual Property Corp of Malaysia
• GT Financing Programmes by Asian Institute of
Chartered Bankers
More than
USD1.8 bil
in financing
assistance
provided
2
• Green Tech certification
Technical
Assessment
by Experts
3
• Business matching with
financial institutions
• IP Marketplace by Malaysia
Intellectual Property Corporation
(MyIPO)
Business
Facilitation/
Market
Platform
• Green Tech Business Review by Malaysia
Green Tech Corporation
• Technology Commercialisation Platform to assist in
end-to-end R&D&C by Agensi Inovasi Malaysia
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
9
The evolution of Credit Guarantee Corporation’s role
1972 – 2000:
Paving the path for FIs to
lend to SMEs
• Provide guarantees to banks, to
increase receptiveness of SME
customers
• Concessionary guarantee fee to keep
borrowing cost low
2000 – 2005:
Address needs of SMEs
in changing environment
• Expanded branch network nationwide
• Implemented Direct Access Guarantee
meet evolving needs of SMEs
• Enhanced advisory services to SMEs
• Provides guarantee for loans without
collateral / with inadequate collateral and
track record
• Provides advisory services such as financial
management .
• Provides direct financing for specific
segments such as start-ups
• Implements Government-funded schemes
targeting specific sectors such as innovative
and new growth areas.
CENTRAL BANK OF MALAYSIA
• Achieve financial sustainability
• Expand products and services to
Scheme
Key roles of CGC
BANK NEGARA MALAYSIA
2005 and beyond:
Perform social mandate
sustainably
• Balance financial sustainability
with developmental role
Role of BNM in ensuring sustainable
performance
• As a major shareholder, BNM initiated
transformation plan for CGC to undertake more
effective role in assisting viable SMEs
– Greater emphasis on enhancing outreach, while
maintaining financial sustainability
• Close engagement with CGC’s Board to ensure
effective performance and achievement of mandate
• Close monitoring through regular reports submitted
by CGC
SMEs benefitted
from CGC schemes
Total value of
loans guaranteed
422,585
RM52.9 billion
Advancing financial inclusion via acceleration of migration to e-payments
BNM Financial Sector Blueprint Targets
Key initiatives to accelerate migration to e-payments
2020
2013
Initiatives
Benefits to SMEs
Pricing reforms
Affordable e-payment fee
25
ePIF framework
• Incentives to adopt e-payments
• Improved e-payment services
Debit card transactions
per capita
30
Payment card
reforms
Cheques
cleared (‘mil)
100
• Affordable card acceptance cost
• Industry-wide effort to expand card
usage and acceptance
JomPAY
More efficient bill payment services
65
E-payments
per capita
200
9
Card Terminals
(per 1,000 inhabitants)
2
197
•
Adoption 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 affordable
– Enhance e-payment infrastructure to improve accessibility, security and convenience
– Promote greater awareness and confidence in the use of e-payments
•
With risk and cost minimisation outcomes embedded in the policy design.
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
11
Continuous efforts undertaken to address challenges in SME development
Barriers for SME growth
•
•
•
•
•
Financing issues
High Transaction Costs
Information Asymmetry
Lack Collateral / Track
Records
High cost of doing business
Uncompetitive / low productivity
Lower profits
Difficulty obtaining funding
Low expansion opportunity
Business /
Entrepreneurial
impediments
Low innovation and
technology adoption
Market access – lack
marketing and branding
knowledge
Human capital – skill
mismatch of workforce
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
12 Corporation Malaysia
Source: Bank Negara Malaysia; SME
Balanced regulatory approach adopted for SME development - Balancing between
regulatory expectations and developmental agenda
Regulators’ Dilemma:
Financial
Stability
Developmental
Agenda
Intended Outcomes:
Intended Outcomes:
• Effective intermediation through prudent lending
• Support economic transformation objectives
• Reduce risk of institutional failure
• Greater risk-taking on financing innovation
• Institutional safety and soundness
• Enhance financing access to underserved
Approach to Balance the Conflicting Agenda:
1 Principle-based Regulation
• Regulations not prescriptive
– Flexible and encourage
pioneering
– Recognises individuality of
regulatees
•
E.g. priority sector lending,
microfinance, agent banking
2 Minimise Information Asymmetry
3 Proportionate Regulation
• CCRIS – assists FIs ascertain
behaviour of applicants
• Phased implementation through
pilot initiatives
• Credit Bureau Malaysia –
independent credit ratings on SMEs
• DFI Act – balancing mandate
achievements and sustainability
• Risk-sharing with CGC for lending to
SMEs and targeted sectors
• AFI platform – Global Standards
Sub-committee and Global
Proportionality Working Group
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
13
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 financing
•
Robust 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.
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
In conclusion
•
Collaborative 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.
BANK NEGARA MALAYSIA
CENTRAL BANK OF MALAYSIA
15
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