Budget 2025: SME Bank calls for support measures to boost SME growth

KUALA LUMPUR: With Budget 2025 set to be announced this Friday, SME Bank Bhd calls for strategic measures to support the growth of small and medium enterprises (SMEs), with a focus on sustainability, financial resilience and digital transformation.

The group’s acting president and chief executive officer Datuk Dr Mohammad Hardee Ibrahim anticipates that the upcoming announcement will provide comprehensive and cohesive measures to align with the government’s objectives of improving the country’s economy and improving the quality of life of the rakyat.

He emphasized the crucial role of financial institutions, especially development finance institutions (DFIs), in economic development.

“SME Bank stands out as the only IFD in Malaysia with dedicated capacity development equipment through our subsidiary, Center for Entrepreneur Development and Research Sdn Bhd (CEDAR), which has benefited more than 82,000 entrepreneurs, mostly micro enterprises”, he told Bernama.

SME Bank is also proactively involved in engagements with the Ministry of Finance (MoF), Bank Negara Malaysia (BNM) and Ministry of Entrepreneurship and Cooperative Development (KUSKOP) in relation to the annual budget announcement, including the upcoming budget for 2025.

Extending financial assistance to affirmative segments

For 2025, SME Bank intends to extend financial assistance to affirmative segments, including the tourism, transport, education, construction, healthcare and manufacturing sectors, as they require additional support to navigate the current climate.

“The expansion of financing requirements and government guarantee schemes are crucial, predominantly for affirmative segments, such as women entrepreneurs, the tourism and Halal sectors, exports and the adaptation of IR 4.0, which involves the evolution of SMEs in digital and technological domains.

“As such, we hope that the government may consider providing greater access to more affordable financing through profit rate subsidies or the allocation of subsidies, which should be supported with capacity building programs,” he said.

Mohammad Hardee affirmed the bank’s commitment to ensuring that entrepreneurs are market ready with a proven business model, providing practical and non-technical technical training.

He noted that with deeper integration of artificial intelligence (AI), entrepreneurs could nurture an environment that facilitates faster financing approval processes with less human intervention.

SME Bank currently offers several programs to help SMEs digitalize their businesses, including the SME Technology Transformation Fund (STTF) and the High Green Tech and Green Facility (HTG).

Aiming for a sustainable and inclusive future

Mohammad Hardee said the bank is committed to making a positive impact on society and the environment. Therefore, its sustainability journey is based on three pillars, namely, responsible banking, responsible business practices and creating social impact.

Through these pillars, SME Bank aims to contribute to a more sustainable and inclusive future, supporting the national objective of achieving carbon neutral operations by 2030 and Net Zero by 2050.

“Our commitment to sustainability is reflected in our three-year Sustainability Roadmap (2021-2023), which is divided into three phases, such as building a solid foundation, institutionalizing environmental, social and governance (ESG) culture, and promoting adoption of ESG in clients’ business operations,” he explained.

Additionally, the bank has also developed its own Sustainability Sukuk Framework (SSF), adhering to international standards set by the International Capital Market Association (ICMA), the ASEAN Capital Markets Forum (ACMF) and the Investment Framework Sustainable and Responsible (SRI). released by the Securities and Exchange Commission.

From 2022 to August 2024, SME Bank has approved sustainable financing worth RM7.76 billion and underlines its mission to empower SMEs and promote sustainable growth, contributing to the country’s economic prosperity.

“As such, we hope that the government may consider profit subsidies or tax benefits, such as an exemption or a lower stamping fee for green or transition financing in legal documents. This could certainly accelerate the rate of absorption and facilitate a response most encouraging on the market.

“This could also include tax deductions or credits on profits from sustainable financial instruments, as well as providing further incentives for Green Sukuk,” said Mohammad Hardee.

He said that by implementing these measures, banks could take advantage of tax exemptions on income from Green Bonds and Sukuk, which in turn would encourage greater issuance of green financial instruments.

Mohammad Hardee also called on the government to formulate policies focusing on carbon credits and sustainability-linked financing, allowing banks to obtain tax credits when financing SME projects linked to carbon reduction or environmental sustainability.

To promote energy-efficient technologies, he suggested that the government explore providing capital subsidies for green investments, offering accelerated capital subsidies to SMEs, which banks could further support through targeted financing.

Tax reduction for the export sector

To support the export sector, one of the main contributors to the Malaysian economy, Mohammad Hardee proposed that the government consider tax exemptions on export earnings, including tax incentives or tax relief for financing extended to SMEs involved in international trade.

“It would be greatly appreciated if the government could consider improving or expanding government-backed guarantees for export-related SME financing, especially when lending to small businesses seeking international expansion to mitigate bank risks and exposure,” he added.

Mohammad Hardee emphasized that SMEs are the backbone of Malaysia’s economy, serving as key engines for the country’s economic growth and contributing significantly to its gross domestic product (GDP).

He said SME development remains a priority, with 1.2 million SMEs representing 97.4 percent of business establishments.

According to reports, the SME segment contributed about 39 percent or more than RM613 million to Malaysia’s GDP in 2023.

Future plans to support SMEs

In the future, SME Bank will continue to help SMEs expand through development programs aimed at elevating the socio-economic status of entrepreneurs, especially from the unserved and underserved segments.

Mohammad Hardee said the bank’s Business Export Program (BEP) has seen an increase in export sales, encouraging it to develop more subsidies that stimulate the export market.

“We also plan to continue the HalalBiz Financing Program in 2025 and hope to introduce additional financing and sizeable programs to energize this growing segment,” he said.

For start-ups, SME Bank aims to address your challenges through its comprehensive program to help accelerate your growth journey by engaging more established anchors.

SME Bank is also preparing to introduce a new green or transition financing program, to be launched in the near to medium term period, which aims to facilitate the green transition of SMEs to meet their decarbonization plan. -Bernama