The Census of Establishment and Enterprise 2005 (Census) highlighted that 80% of the SMEs in Malaysia are micro enterprises (defined as business concerns with less than five full-time employees, and an annual sales turnover of less than RM250,000 in the manufacturing sector and RM200,000 in the agricultural and services sectors). Given this, it is important that a sustainable microfinance industry is developed to ensure that micro enterprise s have access to financing from the formal financial system.

Microfinance Institutional Framework
Towards this end, Bank Negara Malaysia has developed a comprehensive microfinance institutional framework, where banking institutions, development financial institutions and credit co-operative s have been identified to provide microfinance to viable micro enterprises. Within the framework, Bank Simpanan Nasional has been mandated to provide microfinance. Bank Rakyat would provide microfinance to members of co-operatives while Bank Pertanian would continue to provide microfinance to micro enterprises in the agriculture and agro-based sector. Participation of the banking institutions is important, in view of their large funding and network of branches, which is critical to ensure the wide outreach of microfinance.

Benefits of Microfinance

To date, six commercial banks and three development financial institutions have introduced microfinance products. Micro enterprises and self-employed individuals can now benefit from easy, fast and convenient access to micro financing for their business activities. Microfinance products offered by the financial institutions typically have the following key features:

Promoting Awareness Among Microfinance Borrowers
To create awareness on the availability of microfinance, the national microfinance logo was launched by the Prime Minister on 13 September 2007. Financial institutions that offer microfinance will display this logo at their branches, while borrowers who have obtained microfinance are encouraged to display the logo at their business premises. Micro enterprises who wish to borrow microfinance should visit the branches of financial institutions that display the logo. With the implementation of these initiatives, it is expected that more micro enterprises will benefit from microfinance to expand their businesses.

Further information and microfinance success stories can be obtained from the SME Annual Report 2006 published by the National SME Development Council , or from the SMEinfo portal: