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Debt Resolution and Awareness Programmes – A Malaysian Experience

Debt Resolution and Awareness Programmes – A Malaysian Experience. Bank Negara Malaysia 27 July 2011. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach. Content.

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Debt Resolution and Awareness Programmes – A Malaysian Experience

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  1. Debt Resolution and Awareness Programmes – A Malaysian Experience Bank Negara Malaysia 27 July 2011

  2. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach Content

  3. Employs 59% of workforce and contributes to 31% of GDP SMEs account for 99.2% of total establishments* in Malaysia SMEs by size SMEs by sector Agriculture (mainly in plantation & horticulture) 6.2% Medium 2% Manufacturing (mainly in textiles & F&B) 7% Small 18% 548,267 548,267 Services (mainly in retail) 87% Micro 80% * Total establishments of 552,804 based on ‘Census of Establishments and Enterprises 2005’

  4. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach Content 4

  5. SMEs in all economic sectors have access to financing SMEs have access to financing from diverse sources, predominantly the banking sector Financing Outstanding as at end-May 2011 RM billion BIs 135.5 Government Funds and Schemes * 19.8 DFIs 13.0 Venture Capital * 3.4 Factoring and Leasing * 0.1 * At end- 2010 5

  6. Approval rate remains high at 83% % SMEs All customers Continuous access to financing for SMEs remains an important thrust in BNM’s developmental role in the economy • In Jan-May 2011, financing approvals grew by 29.9%, amounting to RM29.2b (51,337 accounts) • SMEs accounted for 38% of total business financing (CAGR since 2000: 6.5% yoy) Title Measure Source: Bank Negara Malaysia

  7. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach Content 7

  8. BNM’s underlying principle is to provide issue-based solutions

  9. BNM engages in multi-channels to enhance access to financing and outreach to SMEs

  10. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach Content 10

  11. Financial Infrastructure Financing Schemes Guarantee Schemes Avenues to Obtain Information & Advice/Redress Debt Resolution & Management Outreach & Awareness Programmes BNM’s holistic framework implemented to assist SMEs • BNMLINK, BNMTELELINK, Mobile LINK • Financing Help Desks at SME Business Association • ABMConnect • Complaint & SME advisory units at financial institutions • Microfinance Institutional Framework • Credit Guarantee Corporation (CGC) • Credit Bureau Malaysia • SME Financing Facilitation Mechanism (ABM-PARTNER) • Various BNM SME Funds • Venture Capital Funds for ICT and Agriculture • Bumiputera Entrepreneurs Project Fund-i • Small Debt Resolution Scheme (SDRS) • Agensi Kaunseling dan Pengurusan Kredit (AKPK) • Various CGC Guarantee Schemes • 10 MP: Working Capital Guarantee Scheme(RM3 b) • Green Technology Financing Scheme (RM1.5 b) • SME financial exhibition • Mass media advertisements • Distribution of promotional materials through strategic partners, including Local Authorities

  12. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach Content 12

  13. Provide interim funding vehicle for banking institutions Remove the NPL distraction from banking institutions Platform to workout debt problems The Small Debt Resolution Scheme (SDRS) History SDRS 2003

  14. Small Debt Resolution Scheme (SDRS) – for the financially distressed SMEs [Established November 2003] To stabilise business cashflow by providing some financial reprieve whilst viable SMEs implement business turnaround plans.

  15. The SDRS process does not take more than 2 months Application Financial Institution (FI) Notify Secretariat R&R Assessment Approve Reject Notify Secretariat Notify Secretariat + Documents Issue Letter of Offer to Customer Secretariat Re-Assess Proposal Present to the SDRC Approve R&R Reject R&R Notify Customer Notify FI Issue letter to FI + Justification for Decision Issue letter to customer + Reasons for Decision Multiple FIs Lenders’ Meeting 7 days 21 days 3 days 21 days 3 days 15

  16. The SDRS success – Provide a Win-Win Solution

  17. More than half of the SMEs assisted have managed to turnaround their business and have either fully settled their debts or continue to repay their debts As at end Dec 2010, the SDRS has restructured/rescheduled 665 SME accounts totalling RM628 million

  18. Banks on their own proactively restructure and reschedule loans For 2010, a total of 1,603 impaired and non-impaired financing totalling RM2.3 billion were restructured and rescheduled by the banks Of which, only 3% were under the SDRS

  19. Objective Services Achievement Debt Counseling and Credit Management [Established April 2006]AgensiKaunselingdanPengurusanKredit (AKPK) • Ensure that the household sectors continue to be resilient • Provide avenue for individual borrowers and potential borrowers to seek advice and assistance in managing their credit • Promote sound and robust banking system • Facilitate debt repayment efforts and minimise incidence of non-payment due to bad debt management. • Financial Education • Educational programs and materials, tips and guides for more disciplined financial management • Counselling and Advice on Financial  Management • Provide counselling and advice on managing finances wisely from financial budgeting, money management and credit related issues • Debt Management Programme (DMP) • Work with borrowers to develop personalised debt repayment plans to help borrowers to repay debts and regain financial control • As at end-Jun 2011, 47,249 accounts have been approved under the DMP with 94,391 enrolled under the debt counselling programme

  20. Status of accounts assisted under AKPK as at June 2011

  21. Reasons for default / difficulty in servicing debt

  22. Mission Advantages Role of mediator Achievement Financial Mediation Bureau (FMB) is an independent body providing a channel to resolve disputes, claims and complaints [Established March 2006] • Provide channel for objective and timely resolution of disputes between financial services providers and their customers • Investigator- investigates all complaints registered with FMB through letters, telephone conversations, face to face meetings • Counselor - advices on the complaint through Mediation/Inquiry • Conciliator - attempts to settle the complaint in an amicable manner Adjudicator - makes the final decision when the Mediation/Inquiry session fails to reach amicable settlement • Services are free of charge and available to all customers • Mediation process including decision is confidential • Mediator is independent in carrying out his/her duties • Complainant is not bound by the Mediator's decision and is free to proceed with the litigation process • Fast, convenient and efficient way to resolve complaints • In 2010, FMB received 902 and 1,704 cases against banks and insurers, with 44% of decision in favour of complainants.

  23. The position in Malaysia Status of SME financing in Malaysia Issue-based solutions Holistic framework for SMEs The Small Debt Resolution Scheme Awareness and Outreach Content 23

  24. Laman Informasi Nasihat dan Khidmat (LINK) provides greater engagement with the public Walk-in Customer Service Centre (HQ & 5 branches) Services available: • Attend to general inquiries and public complaints in matters related to the financial sector; • Provide information on the regulatory aspects of banking and insurance products and services, SME financing and Islamic banking and takaful; • Provide financial advisory and facilitate resolution of issues against institutions under BNM’s purview; • Receive foreign exchange administration applications and provide information and clarification on foreign exchange administration matters; • Central Credit Reference Information System (CCRIS) for reference of personal credit information; • Exchange of mutilated currency notes; and • Sale of Bank Negara Malaysia’s publications. • Established in February 2005 • Service centres at JB, Penang, KK, Kuching & KT branches have been fully set-up in 2009 to complement the services and expand the outreach. Contact Centre • Established in July 2007 • Focuses on the delivery of services via phone, fax, letter, e-mail and sms. Complaint Management & Advisory • Facilitate resolution of complex cases (appeals/complaints) against institutions under the purview of Bank Negara Malaysia. Mobile Service Counters • Introduced in November 2010 to reach the public at the non-urban areas to enhance accessibility.

  25. Many have benefited from the advisory and resolution services provided BNM has assisted 293,388 clients in 2010 No of clients • For BNM: • Majority (96.8%) sought information • 85% of complex issues were resolved • 62.8% of the resolved issues were in favour of consumers Information & guidance 284,019 Resolution of complex issues & advisory 9,369 AKPK has assisted 30,010 clients in 2010 No of clients Source: Bank Negara Malaysia and AKPK

  26. Objective Target Key Features of FHDs Initiatives Undertaken Financing Help Desks (FHD) at Chamber / Association offices nationwide enables SMEs to obtain access to financing information • SME Chambers / Associations to take ownership to increase the level of awareness among their members on the availability of financing avenues, requirements and processes • Instill good financial management practices which will enhance SMEs’ access to financing • Increase convenience and easein acquiring information and advisory on financing matters • Platform for SMEs to obtain information on the various financing avenues, requirements and processes • Provide basic advisory on SME financing • BNM in collaboration with ABM, CGC and SME Corp provides trainers of Chambers / Associations with:- • training workshops • standardised training manual on SME financing • Trainers of Chambers / Associations will further train the FHD staff to be more effective at providing advisory services to their members • 60 trainers from 15 SME Chambers/ Associations trained by 2011

  27. Launch date Type of queries Roles ABMConnect provides an avenue for customers seek clarifiation on banking issues • Toll free hotline: 1-300-88-9980 launched in 2008 • Online version, eABMConnect launched in 2009 • Channel to mediate claims, receive queries and complaints on issues relating to the local conventional banking industry and general concerns about credit. • Complements existing redress/complaints mechanisms of banks and provide an additional avenue for the banking industry to engage with the public and facilitate resolution of issues which may arise from time to time. • Basic personal banking • Matters relating to credit card • Home Loans • Overdraft facilities

  28. Complaints Unit SME Special Units Financial institutions have established complaint units and SME special units • Provide a proper channel for customers, including SMEs, to: • Raise complaints • Serve as the focal point in the banks for managing complaints • Dedicated unit to deal with SME customers • The role and function of the unit covers a broad spectrum of SME issues ranging from identifying and structuring appropriate financial requirements to providing cash management services and other ancillary services such as financial management and insurance protection

  29. Services available One Referral Centre (ORC) at SME Corp provides focal point for SMEs to obtain information • Business Advisory Services on business matters by qualified and knowledgeable Business Counselors, Business Coaches as well as industry experts under the SME Expert Advisory Panel. • ORC Link - Advisory Services by representative from ministries, agencies, banks, Development Financial Institutions and associations. • Info Centre – Via Infoline (1-300-88-1801) or email via info e-mail • Resource Centre - SMEs can utilize the Resource Centre for information on books, articles, magazines, reports and news on SMEs. • Pocket Talks - Organized for smaller groups covering topics such as starting a business, marketing and sales, available technologies, etc. • SME Product Gallery - SMEs can register interest to display their own products at the gallery. • Virtual ORC - Information provided via SME Info Portal and SME Corp. corporate website 29

  30. SME awareness programmes 2010 Distribution of SME information materials (277,915) Outreach programmes nationwide (59) Advertisement & interviews (745) BNM continuously implements awareness programmes • SME events, roadshows • SME Financing Fairs and state level dialogues • 7 radio stations • Newspapers, magazines, radio & TV interviews • SME events & road shows • Strategic partnerships (private, government agency & local authorities)

  31. THANK YOU

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