Govt launches RM2b guarantee scheme

Malaysian Reserve

19 February 2019

Govt launches RM2b guarantee scheme

The Ministry of Finance has launched a RM2 billion special government guarantee scheme for small and medium enterprises (SMEs) to promote Industry 4.0 and boost the automation sector.

Finance Minister Lim Guan Eng said the scheme, which is part of the RM6.5 billion guarantees allocated in Budget 2019, will be managed by its subsidiary Syarikat Jaminan Pembiayaan Perniagaan Bhd (SJPP) with the aim to improve SME access to financing.

“This is important as we find banks are very risk-averse and generally prefer to lend to large companies, as well as those who do not actually need any financing. We hope to change this and help spur the SME sector forward via SJPP,” he said at the launch in Kuala Lumpur yesterday.

Lim also said Malaysia would not be able to move forward and become the prime investment destination for high technology manufacturing and high value-added services without SMEs, which are familiar with Industry 4.0 technology.

Launched in 2009, SJPP has been given the role to manage various government guarantee schemes including the Working Capital Guarantee Scheme, Bumiputera Working Capital Guarantee Scheme and the Automation Process Guarantee Scheme.

Lim said the SME sector has contributed 37% of the Malaysian GDP last year, and that the number is expected to increase to 41% by 2020 through the SJPP initiatives.

He added that under the RM6.5 billion guarantee schemes, up to 70% of the borrowings made by SMEs will be guaranteed by the government.

Currently, SMEs make up about 98.5% of total business establishment in the country.

Meanwhile, SJPP principal officer Chen Yin Heng said the company hopes that the RM2 billion financing guarantee would trigger more small firms to shift their operations into automation.

“We want to ensure that SMEs will go for automation and rely on manual labours, especially the foreign labours,” he said.

Chen added that SJPP also plans to promote the Bumiputera Working Capital Guarantee Scheme which offers RM1 billion worth of loan guarantees at a 0.75% commission fee per annum.

He said previously, SJPP was only catered for market players under the small and medium category, in which the turnover ranged from RM300,000 to RM50 million. However, the micro-enterprises category with below RM300,000 turnover has not been under the SJPP radar.

“As for the 2019 features, we are trying to go into the (micro-enterprises) segment, in which it comprises more than 60% of Bumiputera (entrepreneurs),” he added.

SJPP has assisted more than 14,000 SMEs to gain financing from various financial institutions since its inception. A total of RM18 billion out of RM35 billion guarantees have been used up with about a 0.9% non-performing loan (NPL) rate across all its active schemes.

Earlier in his speech, Lim reminded financial institutions in the country to lower down the interest rate under the SJPP schemes as there were cases where applicants were charged as high as 3.5%.

“Banks must be risk-conscious, not too risk-averse. Risk-conscious is where SJPP comes in.

“I think the 3.5% rate is excessive and I expect to see an immediate reduction — or else a directive will be issued,” he added.

“If we want to see Malaysia moving forward and restore our rightful place among the Asian economic tigers, we must ensure that our SMEs are competitive and capable of going to the next level regionally and globally,” he said

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