Govt provides bigger SEED for Indian businessmen
PETALING JAYA: Indian-owned small and medium enterprises (SMEs) have long lamented the fact that they cannot meet their full potential because there is a lack of money to fund their growth.
Their problem is not because there is not enough funding available that is meant to help all small and medium-sized businesses in Malaysia; the problems these companies have is accessing those fundings.
For example, the government recently announced a RM130 million Islamic financing facility specially set up to help SMEs, but Indian companies said they find it tough to meet the borrowing requirements.
Enter the Special Secretariat for Empowerment of Indian Enterprises (SEED), a government agency set up to assist Indian-owned companies wade through the red-tape involved in obtaining funding.
SEED director AT Kumararajah said the secretariat which reports directly to the Minister in Prime Minister’s Department, G Palanivel, will do all it can to help Indian businesses grow.
“Previously, the practice was to allow only companies that are running for at least six months to apply but now there is a special scheme for start-up companies. There is also a special scheme for graduates to venture into new IT-related businesses,” said Kumararajah.
He said 15% of a RM50 million microfinancing will be channelled towards this special scheme for graduates. Currently, SEED provides microfinancing for the eight traditional Indian business sectors – florist shops, textile, Indian beauty and wedding decorators, franchise, tailoring, barber shops, provision shops and transport.
Kumararajah said several initiatives for micro-enterprises have been taken including an increase in age limit from 55 to 65 years, the introduction of eight new strategic sectors for Indian businesses to be financed under a Tekun-SEED special scheme, special funding scheme for startups, special scheme for graduates and re-engineering loan amounts for “Skim Pembangunan Ushawan Muda India” (SPUMI) applicants.
SPUMI is an initiative to provide a microfinancing scheme which enables financing facilities for businesses among Indian youth aged 18 to 45, in cooperation with Tekun Nasional, Economic Planning Unit and Yayasan Sosial Strategik.
“It was established to improve the socio-economic status of the Indian community. Some RM30 million has been set aside to provide microcredit loans to these young Indian entrepreneurs and borrowers need to be involved fulltime in business and provide a framework on their business plan,” added Kumararajah.
The loans for SPUMI applicants are approved on need basis and this will help increase the average lending limit. Kumararajah pointed out that for bigger companies in the SME sector, SEED has assisted all levels of Indian businesses which is available on public domain.
He said through SEED, RM18.8 million has been secured for 15 companies, the highest amount being RM3 million and the lowest at RM100,000, averaging more than RM1 million per company.
“We have also been able to secure RM4.23 million for 38 companies under the SME Corp, averaging about RM111,000 per company. Another RM3.5 million for 25 companies from SME Corp as “grants” was also been secured. These are not loans but grants, thus companies need not have to pay it back,” said Kumararajah.
He said there are a lot of opportunities for Indian entrepreneurs across all sectors to venture into business and SEED has also requested preferential access for funding as there is a lot that needs to be done and Indian businesses need to be given preferential access to funding.
“These would mean that these Indian businesses must be evaluated on a different basis from a standard evaluation process. This would entail their credit scoring to become better and thus make them more ‘bankable’ business. This is something that we are working on,” he said.
It was reported recently that the perceived reluctance of Islamic banks to give out loans to Indian businesses was probably due to lack of guarantee from the authorities and perceived weak credit-worthiness of the applicants. As of March 29, the number of Indian entrepreneurs who have visited the SEED office was 4,177 of which 2,583 applicants were approved totalling RM65.31million.
Since SEED’s inception, the number of applicants and the approval rates have increased 3.5 times. The annualised allocation from the government for Tekun under the SPUMI scheme has increased 4.5 times from what it was in the previous years. The quantum of average amount of loan per participant has increased 97% up to December last year, and from January 2013 to March 2013, the figure has increased by three times higher.
Kumararajah said SEED will work in tandem with other partner agencies like Bank Negara Malaysia, the Islamic finance units of 13 commercial banks under the Syariah-compliant SME Financing Scheme, Malaysian Industrial Development Finance, Tekun Nasional, Association of Islamic Banking Institutions Malaysia, Amanah Ikhtiar Malaysia, Credit Counselling and Debit Management Agency, CTOS Sdn Bhd, Companies Commission of Malaysia, Credit Guarantee Corp, Human Resources Development Fund and other government/private agencies.
“These partners will collaborate in the various outreach programmes and roadshows that have been planned by SEED throughout the country,” said Kumararajah. He said the main purpose of SEED is to provide access for every Malaysian Indian to be able to play a role in transforming the economic landscape of the Malaysian Indian community.
SEED is different from other government initiatives for Indians because for the very first time the government has been able to bring together multitude of agencies and financial institutions for the common cause of economic empowerment of Malaysian Indians, made possible by the affirmative policy setting aside a special RM180 million fund.