Malaysia expects growth for SME banking

The government forecasts the contribution of SMEs to the gross domestic product to rise to 41% in 2020.

The Association of Banks in Malaysia (ABM) says it anticipates the SME banking business to grow by about 5% as SMEs take on an even greater role in boosting Malaysia’s economic growth under the “Economic Transformation Programme.”

Under this programme, the government forecasts the contribution of SMEs to the gross domestic product (GDP) to rise to 41% in 2020 from 32% in 2010.

Initiatives put in place by the government are expected to boost the growth of SMEs to 8.7% by 2020, an improvement that will increase demand for financing. Banks will have to enhance their capability to support SMEs, including coming up with diversified loan packages to meet the needs of innovative enterprises.

Based on Bank Negara Malaysia's quarterly bulletin for the third quarter of 2011, loan applications by SMEs (including loans to individual businesses) registered an annual growth of 25.2% while loan approvals rose by 27.7% year-on-year in the third quarter. Bank Negara is Malaysia's central bank.

In 2010, SME loan applications for the fourth quarter grew by 14.9% year-on-year while loan approvals posted an annual growth of 13.5%. Loan approvals for the SMEs account for 19.3% out of total loan approvals for the third quarter of 2011.

OCBC Bank, Singapore’s largest local bank by market capitalization, is optimistic about the growth of Malaysia’s SME banking this year. HSBC Bank Malaysia, the largest foreign owned bank in the country, says that with businesses becoming increasingly borderless, SMEs should be encouraged to embrace business delivery via technological innovation for greater efficiency.

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