Syariah-compliant schemes to provide further aid to Malaysia’s SME growth


KUCHING: Syariah-compliant small and medium-sized enterprises (SMEs) Financing Scheme (SSFS) and Commercialisation Innovation Fund (CIF) are set to provide further aid to the growing SME sector in Malaysia.

To note, in an effort to provide further support to SMEs, the Malaysian government in its 2012 budget, allocated RM2 billion for the establishment of SSFS and RM500 million for CIF.

According to Oxford Business Group (OBG) in its Malaysia Report 2012, SMEs represent a significant part of the economy, a fact acknowledged early on by the government.

“According to statistics from SME Corporation Malaysia, the government’s central advisory and information service for SMEs, in 2010 this category of business accounted for 32 per cent of gross domestic product (GDP).

“At the same time, SMEs employed 59 per cent of the workforce and accounted for 19 per cent of Malaysia’s exports,” the report outlined.

Under the SSFS, the report noted, the government has undertaken to pay two percentage points of the profit rate charged by participating Islamic banks to SMEs when financing approved projects.

In addition, the CIF also offers the two percentage point government rebate on financing from the participating Islamic banks for syariah-compliant SMEs to commercialise their research and development.

“These initiatives should have positive implications not only for businesses, but also for a range of the country’s Islamic banks,” the firm said.

From the point of view of the participating Islamic banks, the two schemes could potentially go a long way to mitigating the risks of financing SMEs, and particularly of financing innovative and untested products.

As for SMEs, the advantages of becoming syariah-compliant were also boosted, and thus, potentially leading to an increase in the number of enterprises Islamic investors can participate in, the report cited.

OBG highlighted, “In the longer term though, the schemes may give syariah-compliant SMEs that extra help they need to become larger and more successful outfits, with benefits for the industry and for the wider economy.”

On the other hand, the report noted 13 Islamic banks are said to have participated in the scheme.

“These are Affin Islamic Bank, Alliance Islamic Bank, AmIslamic Bank, Bank Islam Malaysia, Bank Kerjasama Rakyat Malaysia, Bank Muamalat Malaysia, CIMB Islamic Bank, Hong Leong Islamic Bank, Kuwait Finance House (Malaysia), Maybank Islamic, Public Islamic Bank, RHB Islamic Bank and HSBC Amanah Malaysia,” OBG outlined.