Accelerating Business Growth for SMEs

Transcription

1 SADC Development Finance Institutions Network Chief Executives Forum 18 June 2015 Accelerating Business Growth for SMEs by: Dato' Hafsah Hashim Chief Executive Officer SME Corp. Malaysia

2 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 2

3 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 3

4 Population of the World World population has reached 7.05 Billion on December 31, % Female 16.74% Youth* Source: United Nations Statistics Division, December 2012 *Aged years old (as defined by UNESCO) 4

5 Demographic highlights USA: 314 million AFRICA: 292 million INDIA: 1.2 bn MOZAMBIQUE: 25.8 million CHINA: 1.3 bn MALAYSIA: 30 million INDONESIA: 238 million With a population of merely about 30 million, Malaysia can t afford to rely on domestic consumption only to achieve high-income nation status by Internationalisation is crucial 5

6 Southern African Development Community (SADC) is a upcoming region with great economic potential 15 countries, 295 million people Economies in different stages of development Middle income Regional GDP country share in SADC, 2013 (%) Low income with diversified propelling factors Source: World Bank Development Indicators,

7 SMEs face various challenges in retaining their competitive edge World-class enterprise Limited access to finance Inadequate capacity to comply with standards & certification Lack of information Lack of entrepreneurial spirit & management skills Low innovation & technology adoption Limited access to markets Lack of conducive business environment

8 Overcoming these challenges will benefit SMEs ECONOMIC GROWTH EMPLOYMENT CREATION EMPOWERMENT OF WOMEN & YOUTH 1 Huge world is flat and borderless 2 Undertake outsourcing activities and specialisation of production 4 5 Increasing consumer class in ASEAN (rise of middle class population) Relocate and rationalisation of business operations 3 Untapped economic opportunities as region continues to register strong growth 6 Employment and business opportunities for service providers 8

9 SME development a shared responsibility... Government Facilitator Act as catalyst Private Sector Associations, chambers & NGOs to develop SMEs Large firms to mentor SMEs Participation in design & implementation of progs. 9

10 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 10

11 Most countries have a high-level policy committee for SME development Country High-level Policy Committee Name Reports to Functions US i. US Senate Committee on Small Business & Entrepreneur-ship Chair: A Senator Function: Standing committee with jurisdiction over Small Business Administration (SBA) & Small Business Investment Act. Japan SME Policy-Making Council METI Minister Chair & members: 30 learned individuals appointed by Minister of Economy, Trade and Industry (METI) Functions: Advisory functions to METI and SME Agency India National Board for MSME Prime Minister of India Chair: Minister of MSME Secretariat: Small Industries Development Organization (SIDO) Functions: Review policies and programmes of the Central Government in SME development Thailand National SMEs Promotion Committee Prime Minister of Thailand Chair: Prime Minister Members: 12 representatives (at least 6 from private sector and 3 from regional SMEs entrepreneurs) Secretariat: Office of SMEs Promotion (OSMEP) Functions: Deliberation & approval of SME policies Philippines MSME Development Council President of Philippines Chair: Department of Trade & Industry (DTI )Secretary Members: Public and private sector representatives Secretariat: Bureau of MSME Development (BMSMED) Functions: Coordinate & facilitate national efforts on SME development 11

12 and a SME development legislation Country SME Devp. Act Name of Act Definition SME Agency High-level Council Content Procurement Annual Report SME Policies Master plan US Small Business Act of July 30, 1953 Small Business Investment Act, 1958 (Act to establish SBICs) UK Regional Act: Small Business Act for Europe 2008 Think Small First, policy framework, 2001 Japan SME Basic Law, 1963 (revised in 1999) Act on the Organization for SMEs and Regional Innovation, JAPAN (SMRJ), Independent Administrative Agency Act for Establishment of SME Agency India MSME Development Act 2006 Thailand Small and Medium Enterprises Promotion Act 2000 Philippines Republic Act (RA) No

13 Malaysia also has a comprehensive framework to oversee SME development National SME Development Council was set up in 2004 Chair: Prime Minister of Malaysia Members: 13 Ministers, Chief Secretary to Government, Governor of Central Bank & Director General of Economic Planning Unit Significant progress made SME Definition SME Macro Statistics Censuses on SMEs SME Development Framework SME Corp. as central coordination agency SME Masterplan Centralisation of training programme & advisory Information Annual Report, SMEIPA, SMEinfo portal New financial products microfinance, guarantee Financial infrastructure SME Credit Bureau, Small Debt Restructuring Scheme, transformation of DFIs 13

14 There is a lot of room for improvement to create a more conducive business environment in the region Rank on Ease of Doing Business 18 Malaysia Mauritius South Africa Botswana Seychelles Namibia Swaziland Zambia * Regional Avg. Mozambique Lesotho Tanzania Madagascar Malawi Zimbabwe Angola DR Congo Days required to start a business New business density No. of new limited liability companies , , , , n.a. n.a , n.a. n.a , , n.a. n.a , n.a. n.a n.a. n.a. 66 n.a. n.a Faster, cheaper & easier business registration will encourage formation of new businesses. Rate of business formation reflects level of entrepreneurship. Need a constant supply of companies to ensure private sector dynamism. *SADC Region Source: Doing Business 2015 Report, World Bank 14

15 Doing Business 2014: Malaysia 15

16 Doing Business 2014: Mozambique 16

17 Selected SADC economies have a high preference for entrepreneurship as a career but only a small number materialise (%) of population aged Entrepreneurship in the GEM Economies, 2014 Intentions do not translate to actions Angola Botswana South Africa Malaysia Entrepreneurship as a good career choice High status to successful entrepreneurs Fear of failure Entrepreneurial intentions Early-stage entrepreneurial activity Established business ownership rate Note: Of the SADC economies, only Angola, Botswana and South Africa were surveyed in 2014 Source: Global Entrepreneurship Monitor Report

18 Improvements in the ecosystem will promote greater entrepreneurship State of Entrepreneurship Ecosystem, 2014 Rates in scale Malaysia Angola South Africa Botswana Financing for entrepreneurs Governmental support & policies Government programmes Physical & services infrastructure Internal market dynamics Note: Of the SADC economies, only Angola, Botswana and South Africa were surveyed in 2014 Source: Global Entrepreneurship Monitor Report

19 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 19

20 SMEs an important contributor to the development in Malaysia 97.3% (645,136) business establishments in the country are SMEs SMEs cut across all sectors of the economy Medium: 3% 5.9% 90%: Services Manufacturing 3% Construction Small: 20% Micro: 77% 1% 0.1% Agriculture Mining & Quarrying SMEs contribution to the economy Source: Department of Statistics Malaysia and SME Corp. Malaysia 33.1% 57.5% 19% GDP Employment Exports -20-

21 Development of SME policy is through public private advocacy Top-down SME Corp. Think-tanks & researchers Ministries & Agencies Chambers and Business Associations SMEs Bottom-up 21

22 Holistic approach to SME development brought positive results SME growth outperformed overall GDP growth during : NSDC was set up and SME development accorded national agenda Other supportive policies (improvement in government delivery, higher domestic demand and tourism, focus on farmers and small contractors) Annual Growth, % 12.0 SME vs Overall GDP Growth 17% of exports 33% of GDP e 2015f SMEs GDP growth Overall GDP Growth Year 57% of employment Malaysian economy expanded at 6.0% in 2014 Forecasted official GDP growth for 2015 (BNM) is at % Source: Department of Statistics, Malaysia

23 SME Masterplan takes a new approach in SME development Public-private partnership Innovation and productivity-led Approach Outcome-based Live plan 23

24 Breakout Strategy for Micro Enterprises (MEs) 24

25 5 programmes have been identified, targeting MEs across the various stages of the lifecycle Firm size & turnover 5 employees, RM300,000 turnover Programmes Targeting MEs across the ME Lifecycle Start-up ME lifecycle Growth Expansion / Graduation Graduate to SME StartMEUp P1 Valley of Death ME lifecycle stages GrowME MarketME P2 P3 FastTrackME P4 ME MoneyMatters P5 Awareness and Outreach 25

26 35 initiatives addressing ME specific requirements, anchored by 5 first mover priority initiatives StartMEUp P1 GrowME P2 MarketME P3 Simplify process Facilitate business registration & licensing Promote LLPs Tax relief & tax filing support Productivity & business consultations Productivity toolkits Bundled ICT tools with e payment Provide start up support Boot camps for new MEs Start up kit Extended advisory pool (finance orgs, peer mentoring) Improve operations Leverage on ICT Incentivise productivity Success stories on inclusive Productivity voucher Success stories on ICT innovation programme Upskill human capital Productivity diagnosis tools Promote & handhold use of ICT Technical & management trainings Enhance physical channels Access to prime locations Iconic ME retail hub Online market access Access to online markets Mobile buyer seller matching scheme Holistic ME learning certification programmes Distribution support Private sector led trading company(s) Strengthen SDSI & KUD Bundled logistics package Awareness and Outreach Publicly accessible online database of support resources Awareness of ME programmes FastTrackME P4 Dedicated support End to end ME support programmes Structured fast track programme Roadmap of relevant programmes by milestone Results based assistance.. incentivising performance via voucher, finance, training, etc Extended physical ORC outreach ME MoneyMatters P5 Raise awareness Awareness on finance availability & accessibility Increase NBFIs transparency & standardisation Institutional support Insurance backed loans Drive acceptance of alternative credit reports Widen collateral options Success stories on entrepreneurship 26

27 1 INNOCERT Innovation Certification for Enterprise Rating and Transformation NATIONAL INNOVATION AGENDA Human Capital NATIONAL INNOVATION COUNCIL Market JTPIN SME & Technopreneur Adopted from Korean s CERTIFICATION FOR INNOBIZ. To date, more than 15,000 INNOBIZ certified Passing mark of 700 and above out of 1000 points considered innovative SMEs Funding Innovation Led Economy Technology Mission To identify and certify innovative SMEs and enterprises in Malaysia Institution Objective To foster and support innovative SMEs and enterprises to be global innovative competitive players 27 27

28 The Korean Success Story Higher Added Value (4.9 times) More Jobs Creation ( 2.9 times) Higher R&D Investment (3.5 times) Higher Growth (6.9 times) Higher Operating Margin ( 4.9 times) 28

29 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 29

30 Financing is one of the 6 focus areas that is being addressed to unleash the growth potential of SMEs Constraints to Growth Innovation & Technology Access to national innovation system Low commercialisation & R&D Poor technology uptake Human Capital Development Workforce lacks job readiness Low utilisation of existing training Non-competitive rewards & benefits Access to Financing Limited non-banking avenues Poor creditworthiness Lack of know-how and resources Market Access Procurement by Govt/LSIs Information barrier to exports Limited focus on marketing & branding Low bargaining power Legal & Regulatory Environment Licensing / permits Complying to regulations Legislations disincentivising formation & growth Infrastructure Trade clearance and facilitation system Low and infrequent trade volume 30

31 Access to financing is one of the key factors to promote SMEs growth Financing Lifecycle for SMEs Financing for innovative startups begin with personal savings, family and friends As innovative SMEs mature, their financing needs become more similar to other SMEs and debt financing becomes a more important source of external finance

32 Malaysia offers various financing channels to SMEs FINANCIAL LANDSCAPE FOR SMEs BNM Special Funds and Guarantee Schemes Government Funds and Schemes BANKING INSTITUTIONS Credit Guarantee Schemes Credit Bureau Malaysia DEVELOPMENT FINANCIAL INSTITUTIONS Government Crisis Funds Venture Capital Companies Leasing and Factoring Ar-Rahnu and Pawn Broking Microfinance Institution 32

33 with alternative financing growing rapidly Create more avenues particularly for start ups and innovative SMEs Reduce the cost of financing & stimulate innovative power of SMEs Effectively using multiple innovative forms Improve financing support & promote sustainable SME devlp

34 FIs being the main source of external financing Financial Institutions have 735,435 outstanding SME accounts FIs account for 95.8% of total financing Source of Financing of SMEs (% share) Financing Outstanding as at end 2014 DFIs; 6% Borrowings from Friends / Relatives 14.3 *Govt. Funds / Schemes; 2% External Financing (Banks, DFI, etc.) 50.3 BIs; USD61.2 bil; 90% **VC; 1% Factoring & Leasing; 1% Internal Financing (Retained Earnings, Internally Generated Funds, etc.) Source: Economic Census 2011: Profile of SMEs, Department of Statistics Malaysia (DOSM) * As at end Excluding government funds that are channeled through FIs. **As at end-2014 Source: BNM, SME Corp. Malaysia and Securities Commission Malaysia

35 HIP 3: SME Investment Programme (SIP) is an example of alternative financing for early stage Context Limited avenues for early stage financing VC industry lacks vibrancy; highly dependent on public funds (51%) Private Investors RM1 Government Loan through SIP RM 2x matching debt capital Govt. provide long term capital into licensed investment companies Investment companies to provide debt, equity or hybrid investments in promising SMEs SMEs Characteristics Debt in addition to equity Has monitoring & evaluation Managers are mainly from industry 35

36 ... and the example is the SME Masterplan that was built from the consensus of all the stakeholders Vision Globally competitive SMEs across all sectors that enhance wealth creation and contribute to the social well-being SME Development Framework Goals Increase business formation Expand no. of high growth & innovative firms Raise productivity Intensify formalisation Focus Areas Innovation & Technology Adoption Market Access Human Capital Development Legal & Regulatory Environment Access to Financing Infrastructure Action plan: 6 High Impact Programmes and 22 supporting initiatives Institutional Support Reliable Database Monitoring & Evaluation Effective Coordination Effective Business Services 36

37 The SME Masterplan charts direction for SME development till 2020 High-income nation 2020 GDP 41% Employt Exports 62% 25% ETP SME Masterplan 2013 RTP GDP 33% National policies GTP Employment 57% Exports 17% 37

38 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 38

39 SMEs also have to keep abreast with new trends in doing business to remain relevant DOING BUSINESS DIFFERENTLY: Businesses can benefit by adopting new ways of doing business Narrowing the Gap World is virtually borderless, hence necessitating SMEs to adopt ICT & ecommerce Sustainability by participating in outsourcing and networking strategies by large companies / MNCs. Inter-firm networks & linkages for economies of scale Sectoral & geographical based SME clusters for shared resources reduces the costs 39

40 Lets encourage cashless transaction with affordable device cost 40

41 Industrial Linkages & SME Clusters Facilitating access to market by integrating SMEs into the supply chain of the large companies Concentration on high value-add portion of the supply chain MANUFACTURING RETAIL LOCAL INTERNATIONAL 41

42 Outline of the presentation World Population & Economy Role of Government SME Development in Malaysia Role of Banking Institutions Role of Private Sector Recommendation for SADC countries 42

43 Creation of a focused SME agency Capacity building programmes cut across from business start-up to export Encourage industry linkages across SADC countries Institute effective monitoring mechanism for all programmes Access to finance: o Simplify & standardise all SME loan forms o Create special funds for microenterprise, including for women & youth o Fund innovative firms o Alternative non-banking financing Angel Investor, Venture Capital, seed o Mobile banking

44 One Referral Centre Business Advisory Services (BAS) INFOLINE SMS for SMEs Info & Other Information Send to THANK YOU VIRTUAL SME INFORMATION CENTRE SMECORP STATUS [Ref. No] SMECORP BORANG [alamat emel] Find us on Facebook SME Corp. Malaysia 44