SME Corp tightens funding system
SME Corp Malaysia has suspended all grants indefinitely as it restructures funding facilities to stop abuses in the system.
Grants under SME Corp will not be renewed even in the 10th Malaysia Plan period, its chief executive officer Datuk Hafsah Hashim said.
The corporation has been disbursing grants to budding small and medium enterprises (SMEs) for the last 13 years and it stopped doing so since December after all allocations were used up.
Last year, SME Corp was allocated some RM300 million by the government. The allocation for this year was reduced to only RM24 million.
"From now on we plan to offer soft loans through the Malaysian Industrial Finance Bhd ) with low interest rates of 4 per cent," she told Business Times .
"With the loans, people will be more serious as we will provide loans to serious businessmen as we need their commitment as well. The loans will finance 85 per cent of the project while the rest will be put in by the businessmen themselves.
"You look at other countries such as India, Indonesia and Philippines, that's the order of the day. We are phasing out the grants to loans and to intensify good paymasters. We don't want rent seekers who get it easy and then they are gone," she added.
She said although there will be no more grants, the government is mulling over giving out rebates to good paymasters.
"If they are good paymasters we may turn their loans into interest-free facilities after they have serviced it for five years and above without problems or either give them a rebate of at least 20 per cent from the loan if the payment is consistent and the loans are about to finis. But nothing is finalised yet, it's all work in progress," she said.
Hafsah added there will be a new mechanism of financial assistance given on programme basis whereby SME Corp will organise training and seminars for companies to benefit from, especially in the areas of innovation, branding and packaging.
She said although the grants recipients were monitored upon receiving the money, they found that many SMEs were resorting to consultants when applying for the loans, resulting in them (the consultants) receiving a cut once the grant was approved.
Since its inception in 1996, SME Corp has given out RM516.4 million in grants and RM683.6 million loans through MIDF.
The highest grant offered by the corporation is a matching grant worth RM500,000 for technology while the lowest grant offered is RM50,000 for advertising and promotion.
"For the whole duration the RM500,000 grant was offered, less than 20 companies successfully managed to obtain it," she said.
Hafsah said the rationale behind changing grants into loans was also because soft loans are able to provide a better multiplying effect than grants as more companies can benefit from it.
"Right now we have always had money coming in from the government and once we give it out, there is nothing left. With this change, we will be able to roll the money and help more companies," she said.
Grants under SME Corp will not be renewed even in the 10th Malaysia Plan period, its chief executive officer Datuk Hafsah Hashim said.
The corporation has been disbursing grants to budding small and medium enterprises (SMEs) for the last 13 years and it stopped doing so since December after all allocations were used up.Last year, SME Corp was allocated some RM300 million by the government. The allocation for this year was reduced to only RM24 million.
"From now on we plan to offer soft loans through the Malaysian Industrial Finance Bhd ) with low interest rates of 4 per cent," she told Business Times .
"With the loans, people will be more serious as we will provide loans to serious businessmen as we need their commitment as well. The loans will finance 85 per cent of the project while the rest will be put in by the businessmen themselves.
"You look at other countries such as India, Indonesia and Philippines, that's the order of the day. We are phasing out the grants to loans and to intensify good paymasters. We don't want rent seekers who get it easy and then they are gone," she added.
She said although there will be no more grants, the government is mulling over giving out rebates to good paymasters.
"If they are good paymasters we may turn their loans into interest-free facilities after they have serviced it for five years and above without problems or either give them a rebate of at least 20 per cent from the loan if the payment is consistent and the loans are about to finis. But nothing is finalised yet, it's all work in progress," she said.
Hafsah added there will be a new mechanism of financial assistance given on programme basis whereby SME Corp will organise training and seminars for companies to benefit from, especially in the areas of innovation, branding and packaging.
She said although the grants recipients were monitored upon receiving the money, they found that many SMEs were resorting to consultants when applying for the loans, resulting in them (the consultants) receiving a cut once the grant was approved.
Since its inception in 1996, SME Corp has given out RM516.4 million in grants and RM683.6 million loans through MIDF.
The highest grant offered by the corporation is a matching grant worth RM500,000 for technology while the lowest grant offered is RM50,000 for advertising and promotion.
"For the whole duration the RM500,000 grant was offered, less than 20 companies successfully managed to obtain it," she said.
Hafsah said the rationale behind changing grants into loans was also because soft loans are able to provide a better multiplying effect than grants as more companies can benefit from it.
"Right now we have always had money coming in from the government and once we give it out, there is nothing left. With this change, we will be able to roll the money and help more companies," she said.
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