SMEs the backbone of nation’s growth (SME Bank)

DEVELOPING a group of diverse and competitive small and medium enterprises (SMEs) is a central theme towards achieving sustainable economic growth.

Source from (Business Times): http://www.btimes.com.my/Current_News/BTIMES/articles/20121224000822/Article/
Published: December 24, 2012

Some advanced economies have succeeded because SMEs form a fundamental part of their economies, comprising more than 98 per cent of total establishments and contributing to more than 65 per cent of employment.

Globally, SMEs contribute more than 50 per cent to the gross domestic product (GDP) in developed countries like Japan, South Korea and Germany.

Apart from economically, they also constitute 95 per cent of registered firms in the world.

Specifically in the European Union, in 2010, it was reported that SMEs constitute 99.8 per cent of all firms and employ 75 million people. representing around 67.4 per cent of total employment.

In the US, it was reported that in 2010, SMEs constituted more than 50 per cent of the non-farm private GDP and created 75 per cent nett new jobs in the economy.

Evidently, SMEs contribute largely to economies all around the world.
In Malaysia, the SME sector is of great importance to the country’s economy.

SMEs have been largely recognised as the backbone of the economy and play a significant role in generating employment, enhancing the quality of human resources, nurturing a culture of entrepreneurship, supporting large scale industries and opening new business opportunities.

According to the National SME Development Council, 99.2 per cent (518,996) of total business establishment in Malaysia are made up of SMEs.

The SME sector employs about 5.6 million people, contributes 32 per cent to Malaysian GDP and makes up 19 per cent of the nation’s total exports.

Although the numbers may be lower in Malaysia, SMEs have the potential to contribute substantially to the economy.

Constituting more than 99 per cent of total business establishments in Malaysia, it is clear that promoting a viable SME sector is essential in the nation’s stride towards broadening the sources of growth and sustaining growth momentum.

The main challenge that SMEs face is the access to financing and working capital to grow their businesses. This is reflected and addressed in the country’s agendas, namely the Eighth and Ninth Malaysia Plans and the Second and Third Industrial Master Plans.

At this year’s budget, the country announced various plans to support the development of SMEs.

To accelerate the growth of SMEs and the expansion of industrial areas nationwide, a RM1 billion fund will be provided under the SME Development Scheme to be managed by the SME Bank. The measure will facilitate SMEs’ access to financing to further develop their businesses.

In line with this, Malaysia also recently launched an SME Master Plan (2012 – 2020), which will act as the game-changer in accelerating SME growth through innovation and productivity.

The Master Plan outlines the implementation of 32 initiatives, including six high-impact programmes with an allocation of RM30 million.

Aside from this, a fund worth RM10 billion under the Working Capital Guarantee Scheme has been introduced to address SMEs’ minimal access to working capital. The scheme guarantees up to a maximum of RM2.5 million to qualified companies.

Along with this, the country has introduced the Tabung Ekonomi Kumpulan Usaha Niaga (Tekun) to address the needs of small-scale entrepreneurs; with this, these entrepreneurs are capable of commencing and developing their businesses.

To date, Tekun has extended loans totalling RM2.24 billion to 224,175 entrepreneurs nationwide. In 2013, the country will provide an allocation of RM350 million to Tekun.