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Consider Potential Of SMEs When Giving Out Loans, Banks Told [ 03-08-2010 ]
SHAH ALAM, August 2 (Bernama) -- Financial institutions should consider
the potential of small and medium enterprises (SMEs) and their cash flow
when providing loans, Second Finance Minister Datuk Ahmad Husni Mohamad
Hanadzlah said on Monday.
He said the ministry had received many complaints from companies with
innovative products which had secured orders from overseas but still
could not get loans from banks because of the requirement for
collateral.
Banking institutions are still giving priority to established companies
which have been making profits when giving out loans, Ahmad Husni said.
"Asset lending cannot be the only method of providing capital to our
small and medium industries. For an innovative economy to flourish, the
financial industry must provide vibrant alternatives in the provision of
capital to the market," he said.
The minister said this during the launch of Standard Chartered Saadiq Bhd's new branch in Section 13, Shah Alam.
According to Ahmad Husni, business in the country is not as usual and
the government is making efforts to take the Malaysian economy to a
higher gear and the financial industry is expected to be in step with
this move.
"Bankers need to be more innovative in their ability to provide greater access to capital," he said.
Ahmad Husni said for an innovative economy to flourish fully, the
financial industry must provide vibrant alternatives in providing
capital to the market.
"We wish to see banks supporting, not only in terms of capital but also
technical and managerial know-how, to our SME owners," he said.
"The government and its agencies have thus far taken the responsibility
to undertake this role. The private sector can serve a far more
effective role than the public sector ever can," he added.
At the same time, the government was going to beef up the venture
capital sector, another alternative financing source for start-up
companies to look for capital, Ahmad Husni said.
"We are also looking at our development financial institutions, and we
believe these banks (SME Bank and Agro Bank) should take a little risk
in lending to grey areas, like start-up businesses," he said.
Ahmad Husni said the ministry was studying the possibility of
government-linked companies (GLCs) like Khazanah Nasional providing a
portion of their investment funds to help start-up companies through
joint ventures.
He said if the government did not give a chance to companies with potential, the potential might be lost forever.
Ahmad Husni said as the country moved up to a high income economy, the
government would gradually play a more facilitative rather than dominant
role in the economy.
"The traditional roles in both the public and private sectors need to
be swept away. New paradigms need to be established," he said.
Asked about the recent reduction in subsidies like petrol and sugar
price, Ahmad Husni said the government did not simply reduce subsidies.
When the per capita income of Malaysia increased, there would be a
"stronger possibility" for the government to look into reducing the
subsidies, he said.
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