Issues of Malaysian SMEs in Obtaining Credit Facilities

In concern, there are no confidences and warrants. Businesss operate non strictly based on fortune. Basically, there is no manner to avoid for all the hazards connected with get downing a little concern, but you can better it with the readying of a good program in order to run the concern ( Oyegue Osagiator Stanley, 2010 ) .

For the new get downing concern, companies particularly the little and average endeavors can no longer based on the traditional method of making concern ( Alan, 2011 ) . To accomplish success for the concern of SMEs, bank and fiscal establishment must readily to develop suited merchandises and services to help SMEs in every phase of its concern life rhythm from get downing to stop. Therefore, by assisting SMEs to derive fiscal support will let them to take chance to spread out their concern nationally and to get latest engineerings, therefore guaranting their fight and that of the whole state.

HSBC Bank Malaysia Berhad ( 2010 ) , predicts that the little and average endeavor has stronger growing this twelvemonth compared to old twelvemonth. HSBC ‘s latest semi-annual Small Business Confidence Monitor Survey ( 2010 ) , revealed that 25 % of Malayan SMEs planned to spread out their international concern in 2011, 15 % of SMEs already to make so. There is an addition about 67 % from 2009. Malayan SMEs make readying to spread out their international concern and they aim for the top Asia markets such as Indonesia, Singapore and Greater China.

Credit installation from Bankss is an indispensable tool to back up Small and Medium Enterprise. Both capital and gross support is needed for the concern in SMEs. Capital support is required for concern operation such as to get stock, machine, adjustment and furniture. Gross support is required for mundane activities such as rewards paid to employee, office lease, and transit charges. When get downing a concern, SMEs will face a batch of challenges, the chief challenges is entree to fiscal solutions that meet all their marks. Business may non hold sufficient gross to back up the proprietor and besides employees, and do non make adequate hard currency to cover the pre-operating costs.

SMEs choosing the right bank are indispensable. Find out a long-run place for your concern ‘s fiscal demands, those concerns must construct a good relationship with banker. These are of import for SMEs to take a bank with a high rate, good repute, and high duty for their client and might set into service banking solutions for their clients.

Part of commercial bank unwilling to loan to SMEs, as the SMEs could non supply the dependable fiscal information to commercial Bankss for evaluate the hazard. The fiscal information provide in the fiscal statements which must follow the international accounting criterions. Beside fiscal statement provided, Bankss can even necessitate more information than what is the applicant available ( United Nations New York and Geneva, 2002 ) .


Demand additions for little and average endeavors are the recognized feature of most states. This is no exclusion in Malaysia. The little and average endeavors ( SMEs ) occupy a really of import place in the Malayan economic system. There are about 99.2 % of little and average endeavors in Malaysia ( The Star, 2010 ) . Besides that, little and average endeavors are the most of import beginning of new employment. Currently, little and average endeavors contribute 56.4 % of the entire employment chances in the state ( The Star, 2010 ) . Small and medium sized endeavors contribute about 32 % to the gross domestic merchandise and 19 % of the entire exports of the state.

There is no recognized world-wide definition of SMEs ( Vanessa Zuabi, 2010 ) . Malayan SMEs can be grouped to three classs, micro endeavor, little endeavor and medium endeavor. These grouping are based on two standards, which are the figure of employees and the entire gross generated in a twelvemonth. In Malaysia, the definition of little and average endeavors will use for three sectors. They are agricultural, fabrication and services. Harmonizing to SMEs Annual Report 2009/10, beginning from nose count constitution and endeavors, 2005 by section of statistics, Malaysia, service sector formed the largest sector 86.6 % of entire SMEs, followed by fabricating 7.2 % and agribusiness 6.2 % . Agricultural and service sectors have one-year gross revenues turnover non more than RM5 million and the lasting staff less than 50. Fabrication concern is considered an SME if it has less than 150 employees and has one-year gross revenues non transcending RM25 million.


The purpose of this research is to look at the recognition installation offered by commercial Bankss and the procedure in obtaining loan by SMEs. In order to accomplish this purpose, a figure of aims were formulated as below: –

To place the recognition handiness for little and average sized endeavors in Malaysia offered by commercial Bankss.

To understand the process and status for obtaining loan from commercial Bankss to little and average sized endeavors in Malaysia.

To reexamine the job faced by little and average sized endeavors in obtaining loan.


From the research aims above, the undermentioned research inquiries are proposed:

What sort of loan offered by commercial Bankss for little and average sized endeavors in Malaysia?

What are the process and status for obtaining loan from commercial Bankss to little and average sized endeavors?

What are the jobs faced by little and average sized endeavors when obtaining recognition installations from commercial Bankss?


This survey is confined to selected commercial Bankss offer recognition installations to little and average endeavors in Malaysia. The research will compare the type of recognition installations in Malaysia and Singapore. For the research of the job faced by little and average endeavors in obtaining recognition installations, the states include Malaysia, Singapore, Thailand, China and India will be reappraisal. Owing to clip restraints and the big figure of SMEs and fiscal establishments take parting in the recognition installations, the sample size of borrowers and loaners was limited.


The determination from this survey is beneficiary to many parties including pupils, commercial Bankss and little and average sized endeavors. Majority of these surveies dressed ores on Malaysian little and average sized endeavors in obtaining recognition installations from commercial Bankss procedures. The survey would besides lend to greater apprehension of the jobs faced by little and average sized endeavors when obtaining loan. Besides that, it will discussion of the grounds of the commercial Bankss reject the loan application from little and average sized endeavors. By analyzing the type of recognition installations from the Singapore, this survey of comparing is utile in supplying valuable informations to relevant parties such as Bankss and SMEs. In to boot, commercial Bankss will rationality do determination includes cut downing loaning costs, increasing refund rate, runing net incomes to Bankss and cut down the hazard confronting commercial Bankss.


1.7.1 Credit installation

Credit installation is a loan or aggregation of loans taken by a company. There are many different types of loans, it is depending on the demands of the company, such as it can alter from letters of recognition to term loans, and can be committed or uncommitted.

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1.7.2 Loan application

It is the papers that contains the indispensable fiscal and other information sing on the borrower and the loaner based on the informations aggregation to do determination for loaning.

For a concern loan, Bankss normally needs a elaborate concern program that includes income statement, balance sheet, and hard currency flow statement for 3 old ages and the period of loan. The applicant company must province the intent and sum to borrow, continuance of clip of refund, and guarantees or collateral offered. A loan application must neither a committedness from the loaner nor a pledge from the applier. Loan application besides called recognition application ( Business Dictionary, 2010 ) .

1.7.3 Commercial bank

A commercial bank is a in private owned bank and a type of fiscal establishment which acts as the ‘middleman ‘ between borrower and loaner. Commercial banking is besides known as concern banking. A fiscal establishment which accepts sedimentations and clip sedimentations, makes concern loans, and offers related services such as international banking, documental aggregations, trade funding. Commercial bank prefers to do short-run loans alternatively of the long-run loans, it is due to big proportion of a commercial bank ‘s sedimentations is collectible on demand ( Business Dictionary, 2010 ) .

1.7 Administration of Chapter

Chapter 1 touches on the background of the research, the inside informations of the aims and intent of the research. Chapter 2 reviews the literature on the type of recognition installations, process and status and besides review the job faced by little and average endeavors in obtaining recognition installations. Chapter 3 provides inside informations on the design of the survey, informations aggregation and types of analyses used in this survey. Chapter 4 present the findings and analysis of the little and average endeavors. Finally, chapter 5 high spots the drumhead and recommendations of the hereafter research, decision and restriction of the survey.