Micro Credit Financing, a catalyst for SME Growth

Will the second stimulus package to be annouced by Finance Minister and deputy premier YB Dato Seri Najib Tun Razak on 10 March 2009 take into consideration the problems faced by the small and medium size enterprises?

In all fairness the peole are expecting the government to be transparent with its economic data and not run the country in a state of denial despite the world economic turmoil. Question are being raised at dinner tables on how long will this slowdown last, 18 months says one economist, 2 years says another. One analyst say the US is already facing the slowdown last 2 years and we Malaysians have the delayed effect and as such have not seen the impact yet. Hence, the upcoming second stimulus package will be looked upon by many to suatain our economy. Will it be 10b or 20b package. I anticipate a RM15B package as the government need time to continously assess the world situation and fix the remedies continously. Another stimulus package can be introduced later if necessary.

The small and medium size enterprises (SMEs)fall into many categories as SMEs can be as big as micro business to businesses up to RM10-20 million.The fact remain that many economies SMEs account for up to 60% of the GDP and thus giving focus to this area in any stimulus package will be the step in the right direction as it has direct multiplier effect to the malaysian economy.

Given that the meltdown has caused many SMEs to face challenging cash flow problems the focus should be to provide this enterprises with micro and medium size loans i.e to give them breathing space.many of this enterprises have good business models but due to irregular collection patterns they are unable sustain their business.

The govt introduced the Tekun loan scheme up to RM10,000 with 3 years payment pattern with 4% interst. Many startups and micro enterprises benefited from this but the slow processing period have not helped them.

Many people approach me for this loan aand thru my service center we submitted application as far back in November but todate we have not received any news on the status of the loan. The slow turnaround time hampers micro business growth.

Hence i would like to propose a three tier SME loans be introduced as part of the second stimulus package to be unvielde next week. firstly to address the micro entreprise in addition to tekun loan introduce a micro credit loan up to 5Ok, secondly to address SMEs in the next group financial assistance up to RM 1m and to address the bigger SMEs cashflow other loan schemes need to be envisaged.