1. Role of Government in Creating an Enabling
FINANCIAL INCLUSION ADVISERS PROGRAMME
Kampala, Uganda
26 April 2010
Role of Government in Creating an Enabling
Environment for SME and Microenterprise Development
The Financial Stability and Payments System Report covers the Bank’s assessment of key risks and trends in the financial system, and potential implications for the effective functioning of the system.
The Report also reviews the developments surrounding the transformation of the financial sector and payment systems, as well as key regulatory and supervisory initiatives to strengthen foundations supporting long-term stability.
Today’s briefing will cover the Bank’s assessments of conditions and developments in the financial sector, including the broad direction of future policies for the industry.
Mrs. V. Vijayaledchumy
Director, Central Banking Services
Bank Negara Malaysia

2. OUTLINE OF PRESENTATION
Establishment of National SME Development Council (NSDC) and SME Corp
Achievements of NSDC and SME Corp
Improved policy formulation
Improved statistical information
Strengthened capacity and capability
Comprehensive dissemination of information
Enhanced access to financing (covered in next session)
Conclusion

3. Weaknesses in the SME infrastructure prior to 2004 prompted the need to establish a holistic Government approach to develop SMEs, including micro enterprises
Weaknesses prior to 2004
Fragmented development efforts
Duplication of programmes and roles of Ministries
Establishment of the National SME Development Council (NSDC) to drive the SME development agenda
Lack of capacity building efforts for SMEs
Resulting in banks not lending to SMEs because SMEs were not viable
No standard definition of SMEs
Efforts to develop SMEs prior to 2004 was fragmented, with involvement of over 12 Ministries and 40 Agencies.
No central body was responsible for the coordination and synchronisation of the developmental efforts for SMEs. There was duplication and overlapping of objectives.
There was also lack of capacity building efforts for SMEs, resulting in banks not lending to SMEs because SMEs were not viable.
There was also no standard definition for SMEs, with agencies adopting different definitions based on their own criteria. Without a standard definition, some SMEs may be excluded from the entire developmental effort.
Recognising the important role of SMEs in economic development, the Government established the National SME Development Council (NSDC) in June 2004 to drive the SME development agenda.
Difficult to collect data and formulate comprehensive policies 3

4. The NSDC is the highest policymaking body to chart SME development
Description
Chaired by Prime Minister
Members: 15 Ministers and 3 Heads of Agencies
Secretariat: SME Corporation
(Previously BNM)
Roles
Formulate broad policies on SME development
Oversee coordination of policy implementation
Ensure effectiveness of policy implementation
NSDC’s
3 Strategic Thrusts
Enhance SMEs’ Contribution to GDP
Strengthen Infrastructure
Build SME Capacity
Enhance Access to Financing
The National SME Development Council, chaired by Prime Minister, is the highest policy-making body to chart SME development.
It formulates broad policies and strategies aimed at providing an enabling environment for the comprehensive development of SMEs across all sectors.
Since the SME development agenda is widely spread across the scope of various stakeholders within the government arena, the Council will form the crucial link to oversee coordination of and ensure effectiveness in policy implementation across the various stakeholder Ministries and implementing Agencies.
SME Corporation is currently the Secretariat to the Council.
BNM was the Secretariat when the NSDC was established.
The Council adopts 3 broad strategic thrusts as the basis for policies formulation and programmes development:
Thrust 1: Strengthening the Infrastructure (e.g SME Blueprint, enhancing SMECorp, SMEInfo Portal)
Thrust 2: Building the Capacity of SMEs (e.g coordinated training and international marketing, advisory)
Thrust 3: Enhancing Access to Financing for SMEs (e.g. transformation of CGC, establishment of
SME Bank, Microfinance rollout)
The end-game is to enhance SMEs’ contribution to GDP.
The establishment of the Council has resulted in a more focused and comprehensive approach to SME development across all sectors and ensured greater synchronisation of efforts among Ministries and Agencies involved in SME development. 4

5. SME Development Framework 2006 - 2010
Promote development of competitive and resilient SMEs in all sectors
towards increasing SME contribution to the economy
Economic
Socio
Economic
Developing progressive and resilient Bumiputera SMEs and entrepreneurs
Enhancing viability of SMEs across all sectors
Promoting development of SMEs in knowledge-based industries
Objectives -
Key Message: The implementation of SME development programmes is guided by two economic objectives and one socio-economic objective to achieve an ultimate target of “promoting development of competitive and resilient SMEs in all sectors towards increasing their contribution to the economy”.
The two (2) Economic objectives are:
Enhancing viability of SMEs across all sectors; and
Promoting development of SMEs in knowledge based industries.
These objectives are aimed at developing viable SMEs in all sectors to ensure the achievement of broad-based and sustainable economic growth. Emphasis is given in promoting knowledge-based SMEs, being one of the key strategies in SME development.  
In addition, in line with the aim of the Government to achieve a sustainable and balanced economic growth, socio-economic objective has also been set to develop progressive and resilient Bumiputera SMEs and entrepreneurs.
Three objectives are supported by three strategic thrusts, namely:
Strengthening Enabling Infrastructure for SME Development;
Building Capacity and Capability of SMEs; and
Enhancing Access to Financing by SMEs.
In addition, NSDC endorsed a set of key macro performance indicators and targets for 2006 – 2010 to provide the direction for the development of SMEs and to monitor SME performance for the next 5 years.
The targets are based on data obtained from SME Census on Establishments and Enterprises 2005 (the important key indicators include SMEs’ contribution to GDP, employment and exports). I.
Strengthening enabling
infrastructure
II.
Building capacity and
capability
III.
Enhancing access
to financing
Strategic Thrusts 5

6. NSDC’s Achievements Achievements of NSDC
Improved Policy Formulation, Monitoring and Assessment
Enhanced Access to Financing
Improved Statistical Information
Achievements of NSDC
Strengthened Capacity and Capability
Comprehensive Dissemination of Information 6

7. Improved Policy Formulation, Monitoring and Assessment
SME CORP. MALAYSIA
MINISTRIES
AND
AGENCIES
NSDC
Coordinate
Policies
SMEs
Disseminate
Information
and
Research
“One-Referral”
Information
and Advisory
PRIVATE SECTOR
Secretariat to NSDC 7 7 7

8. FUNCTIONS OF SME CORP. MALAYSIA
To Coordinate Policies Formulation and Programmes Implementation
Formulate broad SME policies across all sectors
Point of reference for Government Agencies on SME related issues
Monitor and evaluate effectiveness of policies and programmes
To be ‘One-Stop’ Information
and Advisory Services
Channel to obtain feedback on SME issues
‘One Referral Centre’ of reference for SMEs
To Disseminate Information
and Research
Liaise with domestic and international organisations to share best practices and relevant programmes on SMEs
Manage National SME Database
Publish SME related publications and statistics
Undertake research on SME environment
Secretariat to National SME Development Council (NSDC)
Provide support and administrative services to NSDC
Ensure decisions from the NSDC are communicated to all relevant stakeholders
Notes:
The functions is expected to accelerate the development and promotion of SMEs. 8 8 8

9. ORGANISATION STRUCTURE OF SME CORP. MALAYSIA
NSDC
MITI
Legal Unit
Media and Public Relation Unit
Secretariat
- Project Management Officer
- Transformation Management Officer
Members of the Corporation
Internal Audit Unit
CEO
Deputy CEO I
Coordination & Development
Deputy CEO II
Implementation
Chief Operating Officer
Strategic Planning Division
Programme Coordination Division
Corporate Communication Division
Business Development Division
Economic Division
12 State Offices
Financing and Monitoring Division
Information Technology Division
Corporate Management Division 9

10. STATE OFFICES 10 10

11. NSDC’s Achievements Achievements of NSDC
Improved Policy Formulation, Monitoring and Assessment
Enhanced Access to Financing
Improved Statistical Information
Achievements of NSDC
Strengthened Capacity and Capability
Comprehensive Dissemination of Information 11

12. DEFINITION OF MICRO, SMALL AND MEDIUM
CATEGORY
MICRO
SMALL
MEDIUM
Manufacturing, Manufacturing-related services & Agro-based Industries
sales turnover
< RM250,000 OR
full time employees < 5
RM250,000 > sales turnover < RM10 mil. OR
5 > full time employees < 50
RM10 mil. > sales turnover < RM25 mil. OR
51 > full time employees < 150
Services, Primary Agriculture and Information & Communication Technology (ICT)
< RM200,000
RM200,000 > sales turnover < RM1 mil. OR
5 > full time employees < 19
RM1 mil. > sales turnover < RM5 mil. OR
20 > full time employees < 50

13. TOTAL ESTABLISHMENTS BY SIZE
4,537 (0.8%)
TOTAL ESTABLISHMENTS
BY SIZE
12,610 (2.3%)
100,333 (18.2%)
Total establishments = 552,804
No. of SMEs = 548,267 (99.2%)
435,324 (78.7%)
MICRO
SMALL
MEDIUM
LARGE
Source: Census of Establishments & Enterprises 2005 – Profile of SMEs

14. DISTRIBUTION OF SMEs
BY SECTOR

15. CONTRIBUTION OF SMEs
TO GDP

16. CONTRIBUTION OF SMEs
TO EMPLOYMENT

17. CONTRIBUTION OF SMEs
TO TOTAL EXPORTS

18. NSDC’s Achievements Achievements of NSDC
Improved Policy Formulation, Monitoring and Assessment
Enhanced Access to Financing
Improved Statistical Information
Achievements of NSDC
Strengthened Capacity and Capability
Comprehensive Dissemination of Information 18

19. PERFORMANCE OF SME DEVELOPMENT
PROGRAMMES

20. Development Programmes
STRENGTHENING ENABLING
INFRASTRUCTURE
Involves developing and enhancing physical infrastructure
and information management, as well as creating conducive regulations and operation requirements for SMEs.
Programmes available:
Soft Loan Scheme for Programmes available:Factory Relocation – MITI
Furniture Promotion Centre – MPIC
Provision of Business Premises – MRRD
Incubation Centre – MOSTI
Urban Development and Growth Centre – MRRD
Upgrade basic amenities and relevant infrastructure in kampungs – MOTOUR
Landscape Industry Resource Centre – MHLG
Halal Park Development – HDC
Provision of Marketing infrastructure; Product Packaging Centre (PUSPRO); Distribution Centre; and Agricultural Marketing Centres - MOA

21. Development Programmes
Programmes available:
Matching Grant for Business Start-ups - MITI
Computer Application in Business – MOE
Train and Work Programme - MDTCC
Matching Grant for Product and Process Improvement - MITI
Quality Palm Oil Seeds Assistance Scheme for Smallholders in Sabah and Sarawak - MPIC
Production of Specialty Pepper Programme - MPIC
Produk Malaysia Citarasa Kita - MDTCC
SME Brand Development Programme - MITI
Training Programme for Budget Hotel Operators – MOTOUR
Train the Trainer Programme - MOHR
TUNAS (Tunjuk Nasihat Sawit) - MPIC
Skills Upgrading Programme - MITI
Biotechnology Entrepreneur Programme - MOSTI
Commercialisation of R&D Fund - MOSTI
Bumiputera Manufacturing Incubator - MRRD
Franchise Development Promotion Programme – MOF
Bumiputera Exporters Development Programme - MITI
BUILDING CAPACITY AND CAPABILITY
Includes entrepreneurship
development, human capital development,
marketing and promotion, advisory services, awareness and outreach,
technology enhancement as well as product development.

22. CAPACITY DEVELOPMENT PROGRAMMES BY SME CORP
INDUSTRIAL LINKAGE PROGRAMME
2. SKILLS UPGRADING PROGRAMME
3. SME COMPETITIVE RATING FOR ENHANCEMENT (SCORE)
4. ENTERPRISE 50 AWARD PROGRAMME
5. NATIONAL WOMEN ENTREPRENEUR AWARD (NWEA)

23. SME DEVELOPMENT PROGRAMMES
6. BUMIPUTRA ENTREPRENEUR ENHANCEMENT PROGRAMME ( BEEP)
7. SME – UNIVERSITIY INTERNSHIP PROGRAMME
8. TECHNOLOGY AND INNOVATION PROGRAMME
9. SME EXPERT ADVISORY PANEL (SEAP)
10. OUTREACH PROGRAMMES

24. 24 24

25. REGIONAL COOPERATION 25

26. List of MoUs Signed 1.
Small Industries & Industrial Parks Organization (ISIPO)
22 June 2006 2.
Office of SMEs Promotion (OSMEP) of Thailand
12 July 2006 3.
Small Business Corporation (SBC) of the Republic of Korea
16 July 2007 4.
Organization for Small & Medium Enterprises and Regional Innovation, Japan (SMRJ)
18 July 2007 5.
Syrian Enterprise and Business Center (SEBC)
7 January 2009

27. SKILLS UPGRADING PROGRAMME (cont..)
BEST TRAINING
PROVIDERS
Sembilan Resources Management (M) Sdn. Bhd.
Selangor Human Resource Development Centre (SHRDC)
Institute Global Management (IGM)
Sarawak Skills Development Centre (PPKS)
Terengganu Advanced Technical Institute (TATI)
Penang Skills Development Centre (PSDC)
International Computer Driving License
Preparing Effective Business Proposal
Cashflow Management
Accounting for SMEs
Halal Certification Procedure Malaysia
POPULAR
COURSES

28. SME COMPETITIVE RATING FOR ENHANCEMENT
(SCORE)
Total SCORED - 1,183 SMEs

29. Implementation Channel (Existing Collaborators)
BACKGROUND OF SCORE
a comprehensive diagnostic tool to rate and enhance competitiveness of SMEs based on their performances and capabilities.
developed in August 2007.
What is SCORE?
Example of Radar Diagram for 3-Star company
Analysis:
Weak in financial capability
Assistance:
Require financial management training
Function
identify strengths and weaknesses for improvements; and
facilitate linkages.
Parameter
Business Performance
Financial Capability
Management Capability
Production Capability
Technical capability
Quality System
Innovation
Characteristics
0 – 2 Stars : Very basic business operation
3 – 5 Stars : Some degree of sophistication and can be groomed for export
Implementation Channel (Existing Collaborators)
Retail & Distributive Trade (PUNB)
Construction (CIDB)
ICT (MDeC)
Maintenance, Repair & Overhaul (MINDEF)
Professional Services
(PSDC) 29 29

30. SCORE PARAMETERS - MANUFACTURING Management Capability
SMEs
SCORE PARAMETERS - MANUFACTURING
Management Capability
Business
Performance
Financial
Capability
Technical
Capability
Production
Capacity
Innovation
Quality
System
Corporate Planning
Technology & Innovation Management
Human Capital Development
IT Adoption
Sales
Average Growth
Export
Marketing
Customer Satisfaction
Current Assets
Current Liabilities
Gearing Ratio
Profit
No. of Trained Personnel
MTS Ratio
Types of Technology Utilised
Capital Investment per Employee (CIPE)
Factory Automation Level
Machine Utilisation
Intellectual Property Rights
Product & Process Improvement
Capability of Products & Process Improvement Activities
Practice of Continuous Improvement
Product Certification
Certification (Basic & Advance Requirement)
Awards 30

31. SCORE PARAMETERS - DISTRIBUTIVE TRADE
SMEs
Management Capability
Business Planning / Strategy
Human Capital Development
Reward System
Job Segregation / Management Structure
Business Performance
Financial
Capability
Current Assets & Liabilities
Liquidity & Gearing Ratio
Creditor's Aging
Profitability
Operation Management
Stock
Management
Stock Policy
Stock Management
Sourcing Strategy
Marketing
Capability
Compliance to Requirements
Premise
Insurance
Quality Standards
Sales Turnover & Growth
Profit Margin
Customer Services
Business Growth & Expansion
Suitability of Location
Accessibility
Qualification & Staffing
Experience
ICT Adoption & Utilisation
Standard Operating Procedures
Promotional Activities
Customer Retention
Business Value Proposition 31

32. SCORE RATING - MANUFACTURING
No Star
Very basic operation, manual process and informal negative average growth;
Manual process, Minimal quality management system in place, negative average growth
Semi-automated process, Basic certification/ compliance, Minimal activities in product and process improvement, Minimal average growth
Extensive automation, Quality management system in place, Product and Process improvement carried, IPR registered, Moderately ready for export compliance certification
Fully automated, High potential for export, High investment in Product and Process Improvement, With certification for export e.g. CE Marking, GMP, HACCP
Have good branding, packaging, already exporting to other countries, Have compliance to exporting countries certification requirements

33. SCORE RATING - DISTRIBUTIVE TRADE
No Star
Very basic operation
Financial record not well documented, poor ICT utilisation, poor stock management, low management capability
Basic financial record and stock policy, basic level of operation management, minimal compliance to requirement, unstructured marketing activity
Adequate management ladder, good implementation of SOP, good stock policy, average utilisation of ICT and good customer relation.
Efficient management structure, good stock management, positive business expansion, good financial management and performance, comprehensive marketing plan, good utilisation of ICT
Visionary leadership, established brand presence, excellent integrated system, high capability in ICT adoption, excellent compliance to requirement, excellent stock management, outstanding CRM, high business value proposition, excellent marketing strategy and very strong financial capability.

34. SCORE – 2 STAR FIRM
SCORE – 3 STAR FIRM

35. RECOMMENDATIONS AND ACTION PLAN
Current Situation
Recommendations
Action Plan
Company is semi automated, testing level at 23 bar.
Result
Bottleneck at the end of production.
Product & Process Improvement
Enhance automation with conveyor.
Improve testing through purchase of new water bath tester to 16 bar level.
Assistance under Terengganu Enhancement Programme through Matching Grant for Product and Process Improvement.
Company has no clear vision & mission.
Company need to improve on management skills to acquire better knowledge in management.
To take up courses under Skills Upgrading Programme under SMIDEC.
Send SEAP expert.
Company lack sufficient skilled staff such as QA, Maintenance Engineer, and OSH Officer.
Company has to send their staff for courses or recruit.

36. SME – UNIVERSITIY INTERNSHIP PROGRAMME36 36

37. INNOVATION FOR SMEs INITIATIVES TO DEVELOP INNOVATION-LED
TECHNOLOGY AND INNOVATION PROGRAMME
INITIATIVES TO DEVELOP INNOVATION-LED
TECHNOLOGY-DRIVEN SMEs
NATIONAL SME INNOVATION FOCAL POINT
UNDER IMP3
INNOVATION FOR SMEs
STRATEGIC THRUST 4 – SME / TECHNOPRENEUR
UNDER JTPIN 37

38. TECHNOLOGY AND INNOVATION PROGRAMME (Cont)
MEMBERS OF THE INNOVATION FOR SME COMMITTEE

39. TECHNOLOGY AND INNOVATION PROGRAMME (Cont)
Technology Database
(in collaboration with MASTIC)
TECHMART
in SMIDEC’s
Website
- 270 technologies available for commercialisation
- 18,413 researchers’ profile available
Technology Roadmap
- Completed Roadmaps → Electrical & Electronics
→ ICT
→ Biotech industry
- Work In Progress → Automotive Sector
→ Plastics & Rubber
Wood and wood-based

40. SME EXPERT ADVISORY PANEL (SEAP)
Total Experts : 62
Total SMEs Participated : 59 40 40

41. NSDC’s Achievements Achievements of NSDC
Improved Policy Formulation, Monitoring and Assessment
Enhanced Access to Financing
Improved Statistical Information
Achievements of NSDC
Strengthened Capacity and Capability
Comprehensive Dissemination of Information 41

42. Convention, Seminars/Workshops/ Technical Briefings
OUTREACH PROGRAMMES
Convention, Seminars/Workshops/ Technical Briefings 42 42

43. Business Advisory Services43 43

44. Enquiries through E-mails
Note :
Officiated during SMIDEX 2003 44 44

45. Toll Free Line / Info Line (1-300-18-1801)
Note :
Officiated during SMIDEX 2003. 45 45

46. Publications 46 46

47. THE NATIONAL MARK OF MALAYSIAN BRAND
The Mark of Quality

48. Development Programmes
ENHANCING ACCESS TO FINANCING
Involves the
development and strengthening of institutional arrangements to
support SME financing needs.
Financial assistance is provided based on three stages of business cycles:
early stage financing
business expansion financing
rehabilitation

49. FINANCIAL ASSISTANCE FOR SMES BUSINESS EXPANSION FINANCING
EARLY STAGE FINANCING
FINANCIAL ASSISTANCE FOR SMES
BUSINESS EXPANSION FINANCING
REHABILITATION

50. Financial Assistance (cont’…)
EARLY STAGE FINANCING
Examples:
• Venture Capital Funds - MOSTI & MAVCAP
• Business Effort Group Economic (TEKUN) - MOA
• PROSPER, Retail and Graduate PROSPER - PUNB
• DAGS Start-up - CGC

51. Financial Assistance (cont’…)
BUSINESS EXPANSION FINANCING
• Microfinance Scheme - BNM and participating
Financial Institutions
• Soft Loans for SMEs - MITI
• Japan Bank for International Cooperation (JBIC)
United Loan for ICT Fund - MOF
• Special Fund for Tourism - MOTOUR
• TNB Vendor Financing Programme - MEWC
• Pemborong PROSPER - PUNB
• Skim PKS - PUNB
• Rural Economy Funding Scheme (SPED) - MRRD
• Bank Rakyat Business Financing Scheme - MOF
• PNS Franchise Financing Scheme - MOF
• MARA Business Financing Scheme - MRRD
• Co-operative Financing Fund - MDTCC
• Rural Economic Assistance - MRRD
• Overseas Project Fund – Exim Bank
• Multi Currency Trade Finance (MCTF) and Indirect Exporter Financing Scheme (IEFS) – Exim Bank

52. Financial Assistance (cont’…)
REHABILITATION
Small Debt Resolution
Scheme (SDRS)
- BNM and participating financial Institutions

53. CONCLUSION
The Government can play a vital and strategic role in supporting SMEs
The roles should focus on capacity and capability development in terms of providing good infrastructure, information, coordination and some financial support
The roles should complement private sector and be market friendly in its implementation
The Government’s intervention must involved all relevant stakeholders
The Government’s intervention can be permanent but must be flexible and responsive to new requirements of the business world 53 53

54. Thank You FINANCIAL INCLUSION ADVISERS PROGRAMME
Role of Government in Creating an Enabling Environment for SME and Microenterprise Development
A CPTM SMART PARTNERSHIP INITIATIVE
Thank You 54