It may surprise some of you to know that there are fifteen Government Ministries and 38 Agencies involved in supporting the development of SMEs. The formation of the Council was therefore a mammoth undertaking that clearly signals the commitment of the Government to the SME agenda. The Council, chaired by the Prime Minister and supported by Bank Negara Malaysia as the Secretariat, provides the policy direction of the programmes to support the SMEs, and ensures the effective implementation and coordination of these programmes. The national SME strategy is focused on the development of high performance and resilient SMEs under three broad strategic thrusts, namely, strengthening the enabling infrastructure; enhancing the capacity and capability of SMEs; and enhancing access to financing. Bank Negara Malaysia has been at the forefront of initiatives to ensure that SMEs, at different stages of the business life cycle, have adequate access to financing. These included among others, initiatives to develop a vibrant and sustainable microfinance industry, the establishment of two venture capital funds of RM150 million each for the agriculture sector and the establishment of the Small Debt Resolution Scheme. The various measures have already yielded positive results. SMEs today have greater access to financing, with financial institutions being the main SME financing provider. In 2007, banking institutions approved RM55.1 billion in new financing to more than 109,000 SME accounts. SME financing continues to remain robust. For the first three months of 2008 alone, a total of RM12.4 billion in new financing was approved to more than 34,000 SME accounts.
This represents a significant shift in CGC’s strategic orientation and is validated by studies of the experiences in other countries that have found such advisory support to be critical in enhancing the viability of SMEs. A number of recent initiatives under CGC’s transformation plan deserve mention. These include widening the scope of guarantees to also cover financing by Islamic banks and development financial institutions, introducing a new guarantee scheme for start-up SMEs, participating in Malaysia’s first synthetic securitisation of SME loans, introducing an equity financing arm, and introducing risk-based models for determining guarantee fees. The establishment of the SME Credit Bureau is indeed a watershed event in CGC’s evolution. As a source of credible and reliable credit information that serves the needs of both the SMEs and the potential financiers, it is a natural progression of CGC's continuous effort to enhance access to financing by SMEs. The establishment of a SME Credit Bureau by CGC and D&B would no doubt complement the other initiatives of the Government and the financial sector. The significance of the SME Credit Bureau lies in dispelling the general misconception that SMEs pose higher financial risk to financiers, lack financial management disciplines and would be unable to provide relevant financial information to their financiers to facilitate assessment and monitoring of loans extended to them. Yet, SMEs are often skeptical of the benefits of credit bureaus, believing them to hurt rather than assist SMEs in obtaining access to financing. The reality is very different.