THE small and medium enterprise (SME) business is becoming an important portfolio for banks although there are hurdles which many face in expanding their market share in this business.

In terms of its importance and market size, SMEs at the moment contributes about 32% of the country’s gross domestic product and makes up 59% of total employment. In totality, this segment accounts for 99% of business establishments and contributes 19% of Malaysia’s exports.

Judging from these figures, it explains why banks are eyeing to have a bigger market share for the SME business. Some of the challenges faced by banks in the SME business include the ability to roll out simple and convenient products, the difficulties in reaching out effectively to the SMEs due to their highly dispersed population and in providing a full range of banking services apart from loans.

OCBC Bank (M) Bhd emerging business head Wong Chee Seng says the SME sector continues to be an important part of the bank’s business and will remain so in terms of growth. For this year, he adds the bank has “upped the momentum” and open up more avenues for SMEs to gain financing and enjoy better financial services. These include the participation in various government-initiated lending programmes and the rolling out of more channels for SMEs to perform their banking needs.

OCBC Bank is one of the few foreign banks to be named the Top SMI Supporter by the Credit Guarantee Corporation (CGC), he says, adding that it understands the SME’s nature of business and risk profile despite the diversity of their business.

Wongs says the bank expects improvement this year in terms of revenue growth and loans outstanding for the SME sector compared with last year with more than double-digit growth. Net profit for this sector is also expected to increase by double digit over last year due to improving loans portfolio quality, he notes.

In Malaysia, OCBC has over 200 customer-facing managers in its branches nationwide and they possess in-depth knowledge and skills to deal with various types of SMEs and their respective local and international financing needs.

He says the dedicated Business Banking Centres and Business Banking Commercial Service Centres are other channels which can connect the SMEs to the bank’s suite of business banking products and services.

Wongs says the bank is committed to delivering simple, fast and convenient products and services to assist SMEs in growing their businesses domestically and globally.

Over the years, he says the bank had the opportunity to continually improve in meeting the banking requirements of SMEs via customer dealings, surveys and the building of specialist skills to understand their needs better.

Through this process, he adds the bank has discovered that what the SME really requires are ‘simple, fast and convenient’ banking products and services to assist in their business dealings.

As the SMEs tend to comprise family-run businesses, the business would require straightforward financing solutions in order to provide them peace of mind before moving on to initiatives that would escalate their business to the next level, he notes.

Building on the concepts of “simple, fast, convenient”, the bank has set in place sufficient resources and scorecard lending in order to deliver simple and fast loans as well as convenient cash management services to assist in the daily running of the SME business.

Standard Chartered Bank Malaysia Bhd general manager for SME Banking Vishal Shah says the group is strengthening its SME banking proposition in Malaysia and expect a year-on-year growth of 20% for its SME business.

This growth will be driven by several factors including building strong relationships with clients. In this regard, he says it has increased its relationship management capabilities by 20% this year to provide a team of experts for foreign exchange, trade and cash management.

The bank is also expanding its footprint across the country via 38 branches, 360 HOUSe ATMs and 10,000 MEPS ATMs to enable greater access to SMEs.

HOUSe ATMs, which is a new shared ATM network, allows customers to withdraw cash or check balances on a wider network.

This is the only network in the banking industry to connect four locally incorporated foreign banks electronically - Standard Chartered Bank, UOB, OCBC and HSBC.

The increasing number of SMEs growing cross border as well as the support from the Government with various measures and national strategies to spur a high-growth SME sector has helped the bank grow its SME business, he adds.

Vishal says reaching out to SMEs has been one of the key challenges due to the widespread and highly dispersed population of SMEs in the country. In addition, many SMEs are not aware of the various solutions and support they can get from the banks to fuel their expansion, he notes.

Recognising this challenge, he says the bank is working with various local associations to drive awareness programmes, adding that it has capitalise on the bank’s relationship managers as well as via branch network expansion to reach out to SMEs.

With the heightened uncertainties in the global landscape due to changing interest rate, foreign exchange and fluctuation in commodity prices, he says the SMEs will not only require loans, but a full and sophisticated range of banking services, including credit, trade and working capital, cash management, treasury and insurance.

Alliance Bank Malaysia Bhd SME banking head Steve Miller says the SME business is one of the main contributors to the bank’s bottom line. For the financial year ended March 31 SME loans and deposits grew by 12% and 16% respectively year-on-year.

He attributes this to expanding borrowings to smaller scale SME businesses which generates stronger margins for the bank and aggressive cross-selling to existing customers.

Some of the specific focus areas he says that the bank is exploring is on women entrepreneurs, which is a growing SME segment in Malaysia. For the current fiscal year, Miller says it will implement targeted initiatives that will appeal to our desired mix of SME customer segments.

“We will strengthen our cross-selling capabilities by re-aligning our front line sales force’s focus. To support our transaction banking initiatives, we will be upgrading our channel capabilities with a focus on internet banking,” he stresses.