SMEs and digital economy likely to get more in Budget 2018

These 2 rising sectors are seen as key drivers to aid in stimulating employment and GDP


Small and medium enterprises (SMEs) and the digital economy are expected to get more than the previous budget’s RM17 billion allocation in the upcoming Budget 2018.

Second Finance Minister Datuk Seri Johari Abdul Ghani said these two rising sectors are seen as key drivers to aid in stimulating the economy in terms of employment and gross domestic product (GDP).

“SMEs and the digital economy have always been our priority, as they make up to approximately 98% of the businesses in Malaysia — contributing 65% of employment, which is equivalent to 6.6 million.

“They also consist of 36% of the total GDP to date, which is about RM1.2 trillion, while 80% of our SMEs contribute approximately RM800 billion in total exports,” Johari said while officiating the Malaysia Debt Ventures Bhd (MDV) fund launching ceremony in Kuala Lumpur yesterday.

MDV — a wholly owned subsidiary of the Minister of Finance Inc unveiled its third fund of RM1 billion yesterday, coupled with a revolving credit line of RM500 million, which is set to be raised via Islamic medium-term notes (iMTN) for a tenure period of 20 years.

The fund is aimed to identify and fund new technology areas and launch complementary financing facilities for the information and communication technology, green technology, biotechnology and emerging technology sectors.

MDV is targeting to disburse approximately RM4 billion worth of financing to 300 firms operating in the relevant sectors over the span of the next 10 to 15 years.

Speaking at the launching ceremony, MDV MD and CEO Datuk Md Zubir Ansori Yahaya said approximately RM100 million worth of financing is expected to be rolled out over the next six months targeting 15 companies.

“We anticipate the cost of funds for the whole RM1 billion to hover between 4% and 4.5% per annum and we are charging customers between 8% and 8.5% year-on-year, which is a relatively small margin.

“The tenure for each drawdown will be for about seven to 10 years, whereby we will be doing three or four rounds of the drawdown to ensure the funds are fully utilised,” he said, adding that the RM1 billion fund will only be issued once there are good rates for the drawdown period.

Moreover, Md Zubir added that the deployment of this third fund would give a boost to MDV’s existing financing portfolio, which has shown a consistent growth over the years.

“Given the government’s continued support and ongoing emphasis on technology and innovation, I am confident that MDV will continue to expand its financing portfolio and play a vital role to promote high value technology and innovation as a path to a high income nation,” he said.

MDV chairman Tan Sri Zarinah Anwar said this new fund will help young companies scale up their businesses, improve their product and service portfolios, and to eventually gain market traction.

She added that the company will also be looking into new and innovative financing products, such as hybrid financing structures and mezzanine financing, to allow the firm to offer financing options that are better suited in the current era of digitalisation.

“As a venture debt financier, MDV adopts a different approach to funding, emphasising on the potential of an applicant and its project by analysing the viability and suitability of its technology, the management and technical personnel behind the applicant, as well as the feasibility of its business plan and cashflow projections,” Zarinah said.

Prior to this, MDV has managed its first two funds, with the first comprising RM1.6 billion sourced from the Japanese Bank of International Cooperation in 2002 and the second from an issuance of RM1.5 billion in iMTN in 2008.

Since its inception in 2002, MDV has disbursed more than RM11 billion in financing to more than 680 technology companies, enabling them to complete and deliver about 773 projects.