The turmoil in the oil market due to the Iran war has disrupted supply chains across many economies around the world. There is barely any country insulated from the effects of this supply chain-driven crisis. Malaysia, while a net energy exporter (oil and gas), remains a net importer of crude oil. This effectively means that our country’s economy is also affected by the supply chain crisis, with inflationary pressure creeping and unemployment rate spiking.
In April, unemployment rate jumped 20% to around 7,000 people losing their jobs. The cracks are showing. Micro, small and medium enterprises (MSMEs) are again the most impacted category with cash-flow constraints, with some estimated to have an average runway of only six months amid the ongoing uncertainty.
Source: https://www.wikiimpact.com
MSMEs make up 40% of the country’s gross domestic product and employ nearly 48% of the workforce. We are seeing many announcements, including a RM5bil special funding allocation under the SME Stabilisation Relief Facility to help affected businesses manage their cash flow. Another would be the RM5bil guarantee facility provided by Credit Guarantee Corp Malaysia Bhd and Syarikat Jaminan Pembiayaan Perniagaan Bhd (SJPP), bringing total support for the MSME sector to RM60bil.
Speaking from personal experience, I have seen disappointing encounters when seeking bank financing for clients. The financing in green renewables or for scheduled waste have taken long periods for approval. Why? The client does not have a GLC or GLIC as its shareholder. The sector assumptions are not widely accepted. The size of the facility is too large. The risk unit of a bank is not ‘comfortable’ with the project profile. And so forth.
Building my own business (financial advisory) from the ground up with no external fundraising, I can say that the banking system in Malaysia does not foster entrepreneurial endeavours. In fact, it is a major hurdle to MSMEs as the bank establishments are too entrenched following the post 1997 Asian financial crisis consolidation exercise.
The banks prefer only to lend to highly profitable businesses that may not need it and deprive those who have genuine financing needs. They back winners or those who they think are winners. This is why regardless of whether it is an economic crisis such as Covid-19, the banks all remain highly profitable so much so they can afford to pay windfall dividends to shareholders and higher taxes to the government during the period.
Some may argue that, with the government rolling out many programmes today, the situation must be different. While larger allocations may increase banks’ capacity to disburse loans, the more important question is who ultimately receives the financing. Many have been approached by relationship managers and bankers to take up special SME loan facilities with low interest rates, even though they do not need additional financing. This includes owners of listed companies and large private corporations. In many cases, financing is channelled through associated companies or subsidiaries of privately held groups. Even where traditional collateral may be lacking, banks are often willing to accept corporate guarantees from financially strong parent entities. What this effectively means is that banks hardly lose. They only finance profitable companies with little to no risk of default. In addition, many facilities remain collateral-backed and may require borrowers to purchase key-person insurance from related insurance providers at exorbitant premiums. As a result, banks can generate income not only from lending activities but also from associated financial products.
If we truly want to foster entrepreneurship and help the MSMEs evolve into high-quality public-listed companies, this is not the way. There is a pressing need to have a larger pool of dedicated funds that invest directly in MSMEs. Beyond lending, these funds should provide equity financing and growth capital to promising businesses with the potential to scale. And use licensed corporate finance advisors (CFAs) to steer MSME on a pathway to success. Banks only look after their own balance sheet! If only they use CFAs with BNM’s approval to assist in the growth trajectory of MSMEs then we may have a dynamic landscape and more employment opportunities for fresh graduates.
Reference:
Are
banks truly helping MSMEs?, Ng Zhu Hann, The Star, 13 June 2026
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