Key Features of SME Assistance Guarantee Scheme (SAGS)

* Guarantee cover provided by CGC - 80 per cent guarantee cover on principal and normal interest. Risk on the remaining 20 per cent will be borne by the participating financial institutions

* Guarantee fee - No charges

* Interest/financing rate charged - Determined by the participating financial institutions

* Source of funds - Participating financial institutions

* Purpose of financing - Working capital. Project financing. Capital expenditure. Shall NOT be used to refinance existing credit facilities.

* Eligibility criteria - SMEs with shareholders funds below RM3 million; SMEs that are not affiliates and subsidiaries of GLCs and PLCs; SMEs owned by Malaysians (at least 51% shareholding) residing in Malaysia and SMEs adversely impacted by the current economic slowdown.

* Maximum financing tenure - 5 years.

* Maximum financing amount - Aggregate financing of RM500,000 per SME.

* Application deadline - Open from 3rd February till 31 December 2009 or upon approval of financing up to RM2 billion, whichever is earlier. The continuation of the Scheme thereafter will be subject to review.

* Participating financial institutions - All commercial banks, All Islamic Banks, Agrobank, Bank Rakyat, SME Bank, EXIM Bank and Bank Simpanan Nasional.

SAGS To Help Malaysian SMEs in Challenging Times

Bank Negara Malaysia recently announced the establishment of a RM2 billion SME Assistance Guarantee Scheme (SAGS) to ensure that viable SMEs adversely impacted by the current economic slowdown continue to have access to adequate financing.

With the guarantee cover, it is envisaged that access to financing to viable SMEs will be enhanced and at a lower cost.
Eligible SMEs can obtain financing of up to RM500,000 per SME under this Scheme for tenures of up to 5 years. The Credit Guarantee Corporation (CGC) will provide an 80% for financing approved under this Scheme.

The guarantee cover will be provided free of charge and the cost of the guarantee will be fully borne by Bank Negara Malaysia.

Financing obtained under this Scheme is for new financing only and must be used for business purposes, such as working capital, project financing and capital expenditure.
This Scheme can be accessed at any commercial and Islamic bank, SME Bank, Agrobank, Bank Rakyat, EXIM Bank and Bank Simpanan Nasional.

Participating financial institutions will determine the lending or financing rate to be charged and applications are subject to the normal credit approval process of the participating financial institutions.

Applications for this Scheme will be open from 3rd February 2009 till 31st December 2009 or when the financing limit of RM2 billion has been fully utilised.

For further details, SMEs can approach the participating financial institutions or contact BNMTELELINK at 1-300-88-5465 or visit the BNM website at www.bnm.gov.my

Zeti: Credit facilities for Malaysia SMEs in place

MALAYSIA'S central bank has put in place facilities to ensure there is adequate bank financing for viable small- and medium-sized enterprises(SMEs), recognising they will be hurt most by the current credit crunch, says governor Tan Sri Dr Zeti Akhtar Aziz.

"We already have all the facilities to provide credit at concessionary (interest) rates of between four per cent and six per cent to overcome the immediate difficulties faced by them," she told Business Times.

"(For instance,) we have the Credit Guarantee Corp (CGC) where SMEs can gain access to financing as well as provide advisory services and debt restructuring for smaller debts," she added.

For the first 10 months of last year, CGC offered credit guarantees to more than 6,800 SMEs.

Bank Negara Malaysia has established two funds, namely the Fund for Small and Medium Industries 2 and the New Entrepreneurs Fund 2, to support viable and new SMEs to obtain loans at concessionary rates of between four per cent and six per cent per year, which can be applied through commercial banks and development finance institutions.

Viable SMEs that have difficulty in meeting their loan obligations can restructure their loans through the Small Debt Resolution Scheme.

Banks will restructure their repayment terms to enable them to pay at an affordable lower amount.

As at October, more than 600 SMEs have benefited from this scheme. For micro-enterprises, or small businesses with revenue less than RM250,000 or fewer than five employees, Bank Negara has introduced the "Pembiayaan Mikro" scheme to help them gain access to micro loans (defined as loans less than RM50,000 without any collateral).

"The latest data show that although applications for loans moderated, the growth in loan outstanding to SMEs as at end November 2008 increased by 10.2 per cent.

"Apart from access to financing, Zeti said a high-level council, comprising 15 ministries and agencies, has also been successful in implementing 198 programmes for SMEs, including entrepreneur development, human capital development, advisory services, awareness and outreach, technology enhancement and product development.

In order to further spearhead SME development initiatives in the country, the government has transformed the Small & Medium Industries Development Corp into a SME central coordinating agency, known as SMECorp Malaysia, that has taken over the functions of Bank Negara. "SMEs represent part of the domestic economy which has been holding its ground at this point of time and we expect growth to continue with their support," said Zeti.

"Access to credit to the SME sector is key to sustaining domestic economic activity."

She added that the RM7 billion fiscal stimulus package, which will be implemented early this year, is one of the important measures taken by the government to assist and support SMEs and ensure their growth in the domestic economy.

While the banking sector may have initially over-reacted to become more cautious in this uncertain environment, they are now taking a more proactive approach in their lending activities, she added.

Based on a recent survey conducted by Bank Negara on business enterprises, SMEs form 99.2 per cent, or 558,267, of business establishments in Malaysia, of which 80 per cent are micro enterprises.

More than 80 per cent are in the services sector, followed by seven percent in the manufacturing sector and six per cent in the agriculture sector.

*Posted as published in Business Times. Jan 1 2009

5 errors to avoid in a financial crisis

But sometimes what you don't do can be just as critical, says Harvard Law School professor Elizabeth Warren, co-author of "All Your Worth: The Ultimate Lifetime Money Plan."

Here are some of her "don'ts" to keep the situation from getting worse as you right yourself financially:

1. Don't borrow more money. Sounds like a no-brainer, right? But in a money crisis, people tend to do the opposite.
"Some people engage in a shell game with themselves," says Warren.

"They pay more down to creditors than they really can afford, leaving themselves with no cash.

" Then they charge current expenses. "They're caught on a treadmill," she says. If you've hit a financial crisis, stop borrowing.

2. Don't cash out your retirement. "There's a reason that money is protected from your creditors," says Warren.

"It's there to protect you when you will not be able to provide for yourself."
No matter what you've signed, you shouldn't feel any obligation to use it for debts.

"When the creditors made their bargains with you, they never expected to be able to reach your retirement," says Warren. "Don't give it up voluntarily."
3. Don't take out a home equity loan or second mortgage. "It is so tempting," she says.

Here's why it's a bad idea: If you're having trouble meeting the bills, unsecured creditors (such as credit card companies) can't take your home.

But if you borrow against it, the new lender can. And if you later decide to file for bankruptcy, the home is usually protected. Unless you've used it as collateral.
4. Don't file for bankruptcy until the crisis is over. "Filing too soon, that is before the crisis is over and the debt hemorrhage has stopped, can leave the person in worse shape," says Warren.

"Because the problem continues, the debts mount up and now bankruptcy is not available."
For instance, if you got into the situation because you lost your job, wait until you are securely in a new job and have some assurances of stability before you file.

If medical bills are the problem, see if you can wait until the crisis is over and you know you won't be adding new bills to the pile. And if it's a divorce, wait until the papers are signed and you have all your legal bills and know more about your new circumstances.

"Bankruptcy shouldn't be based on the debts you've built up," says Warren. "Bankruptcy should be a strategy to emerge. It isn't about dealing with an immediate problem. It's about making a better future."
5. Don't panic. "You have options," says Warren. But it's really difficult to plan when all you can see are the creditors you have and the dollars you don't.
"People feel very alone when something goes wrong, and they often feel they are the only ones facing a financial crisis," she says. "And they aren't.
"If you tried your best and ended up in a hole, then don't beat yourself up," says Warren.

"And don't assume you're the only one who couldn't figure out how to win 100 per cent of the time in the great financial game. This is temporary. You'll come back."

Little things make a big difference

THREE years ago, the government helped 42 small companies to promote their products in a Hong Kong supermarket. Only two made it.
Syarikat Hang Tuah Sdn Bhd's Hang Tuah Coffee and Alif Sauces by Alif Food Industries Sdn Bhd remain on the shelves of Wellcome Supermarket until today.
That episode underscores how difficult it is for Malaysia's small andmedium-sized enterprises (SMEs) to break into overseas markets.
Although SME products may have all the potential to make it abroad, it is the little things that make the difference, which are overlooked.
These include the packaging, labels that spell out the nutrient contents and even the product's weight.
The Hong Kong trip in 2005 was part of the government initiatives to help SMEs, in partnership with hypermarket operators present in Malaysia.
Wellcome Supermarket is owned by Dairy Farm Co Ltd, the parent of Giant hypermarkets.
Besides Hong Kong, similar campaigns were launched in Paris and the UK three years ago by Carrefour and Tesco respectively.
Giant Malaysia and Wellcome Supermarket launched a two-week campaign recently to promote food items produced by Malaysian SMEs at 19 selectedWellcome supermarkets on the island.
The "Taste of Malaysia" campaign is a collaboration between the two retailers and the Ministry of Domestic Trade and Consumers Affairs Industry.
Deputy minister Tuan Jelaing Anak Mersat launched the promotion at the Wellcome Supermarket Metro City 111 in Hong Kong.
Unlike 2005, this time around a buyer from Hong Kong chose the products deemed to have the potential to be marketed there.
Previously, the government helped the SMEs to bring the products to test the market.
"Last time, we brought over products that we think the local market would want. But now, we let them choose what they want, that's why we are hopeful to get all the products listed in the supermarket," Tuan Jelaing said.
The minister believes that this is the right way to introduce SME products internationally. It may continue to do the same for other overseas markets.
Wellcome Supermarket marketing director Diane Chiu agreed that the major difference in product selection this time will help create awareness.
She also hopes the new products that were selected will stimulate demand by Hong Kong consumers.
"This time, we have more say in the product selection so we chose those that suit the Hong Kong consumer's taste, which consist of 95 per cent local Chinese, most who are well travelled and aware of food available inMalaysia," she said.
Popular products that are sought for by Hong Kong consumers are sauces, noodles and snacks like cookies and chips.
Meanwhile, distributor Fok Hing (HK) Trading Ltd sales and marketing director Charles Lui pointed out that Malaysian products lack a brand identity compared with products from Indonesia, Thailand and Singapore.
"Malaysian SMEs may have good products but poor branding and lack of identity make it difficult to market the products outside of Malaysia,"he said.
"For foreigners, when they think of nasi goreng , they will think it's from Indonesia and lontong is from Singapore, Tomyam is from Thailand.
That is the product identity that Malaysia lacks especially when it has similar products with these countries," said Lui.
Fok Hing is the distributor that is bringing Malaysian SME products to Hong Kong. It is also the distributor for products from Indonesia and Thailand.
Lui also suggests the ministry to spend more to allow foreign consumers taste Malaysian food. This will take time, but at least it could create the buzz or word-of-mouth marketing for Malaysian food abroad.
Another important point for Malaysian products is the pricing, where it is priced among the mid-ranged goods. One way Malaysia could compete is by selling cheaper products and companies could reduce product weight to do so, Lui said.
He also hopes the government will continue to support Malaysian SMEs and keep them updated with issues like labelling requirement and packaging efficiency to comply with international requirement.

* This is an interesting read for SME players out there. The article appeared in Business Times on Dec 20 2008.

Government's pledge to help Malaysian SMEs

Small and medium-sized industry players in the country can take some breath of relieve as the federal government recently made the pledge to help SME players weather the worsening economic climate.
The New Straits Times in one of its reports recently quoted Deputy Prime Minister Datuk Seri Najib Razak as saying that relevant ministries had been directed to submit recommendations to provide the necessary assistance.
Najib said the SMEs would be assisted to face the "extraordinary" economic situation and sharp drop in demand for their products.
"We hope the relevant authorities and ministries can send in their
recommendations or proposals quickly. The government is prepared to look
into ways to help the SMEs," Najib said, as reported.
Prime Minister Datuk Seri Abdullah Ahmad Badawi recently said that the
government would continue to closely monitor global economic developments and take steps to keep the domestic economy on an even keel.
He said the government had taken pre-emptive measures to cushion the
impact by announcing a RM7 billion stimulus package alongside plans to
liberalise the services sector.
SMEs contributed 32 per cent of gross domestic product, made up 56 per
cent of total employment, and accounted for 19 per cent of total exports.
"Therefore, it is exceedingly clear that as we attempt to ride out the
storm ahead of us, we must stand committed to the development of a robust and competitive SME sector," Abdullah had said.
He further said that banks and development institutions approved RM63.2
billion in funding to over 132,000 SME accounts in 2007.
Najib also had denied that multinationals were deserting the country
due to worldwide economic uncertainties.