Most SMEs unaware of Islamic financing options

PETALING JAYA: A recent survey conducted by Bank Negara revealed that almost 60% of small and medium enterprises (SMEs) are not aware of the availability of Islamic business financing facilities.

“Indeed, most SMEs adopted conventional financing. Some may still have the misconception that Islamic finance is only for Muslims. Today, we hope to dispel this and create more awareness about what Islamic finance is and has to offer,” Bank Negara Malaysia () assistant governor Adnan Zaylani Mohamad Zahid said in his welcoming speech at the inaugural Islamic Finance Rendezvous Series hosted by the Penang state government today.

According to him, Islamic assets stood at RM874 billion or 30.4% of total assets as at end September last year, with an annual growth of 10% over the past three decades.

At the end of the third quarter last year, takaful contributions amounted to RM1.7 billion with market penetration at 15%. Adnan said that growth of Islamic finance in Malaysia has been resilient and supportive of social and economic developments.



“What underlies this growth is the robust foundation and building blocks that the government and BNM, together with the industry, have worked towards, namely in infrastructure development, institution building, robust regulatory framework and product development. We are now at a stage where we view that the foundations are solid and the industry is ready to deliver solutions to meet your needs,” he added.

Adnan said there is now a wide ranging spectrum of Islamic financial products to meet the needs of businesses such as supply chain finance, which enables businesses particularly SMEs, to leverage on the creditworthiness of their anchor suppliers or buyers who are mainly multinational companies, to obtain financing at a more affordable rate which may not be possible through direct approach with banks.

There is also coverage in takaful products at competitive prices, which for example include coverage for loss or damage to goods shipped on all types of conveyances from manufacturing to trading while the Investment Account Platform (IAP) offers more competitive financing terms and variations in financing structures for ventures. To date, the IAP has supported eight ventures worth RM161.3 million.

In addition, there is as an alternative form of financing for businesses, such as green for green businesses. To date, five green have been issued by Malaysian solar companies to finance projects, amounting to RM866.8 million since July 2017.

“At the national level, the government is indeed supportive of the role of Islamic finance as an important tool to assist businesses and SMEs to flourish. Developing Islamic finance and the growth of SMEs are key national strategies, as reflected in the recent 2019 Budget,” said Adnan.

He said the SME Shariah-Compliant Financing Scheme of RM1 billion was established to strengthen SMEs by offering lower financing costs with a 2% reduction in financing rate.

“Sukuk issuers also benefit from the three year extension of the double tax deduction for additional expenditure incurred for sukuk issued under Ijarah and Wakalah principles. Other cost savings for sukuk issuers include reduction in professional fees relating to due diligence, drafting and preparation of prospectus; and various fees charged by Securities Commission Malaysia and Bursa Malaysia,” he added.

Source: The Sun Daily







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