Bank Islam Malaysia and the Halal Development Corporation (HDC) have launched an SME Finance program GO Halal with a RM100 million fund portfolio to develop the halal ecosystem in Malaysia. SMEs financing plays an important role in building the Malaysian economy, especially in terms of developing an ecosystem and halal-centered industry.
As part of the campaign to promote the economy, Datuk Seri Mohamed Azmin Ali, Malaysia’s Senior Minister for International Trade and Industry, said the fund will assist small and medium businesses (SMEs) to increase their skills, reskill, and build capacity.
Finance loan provides opportunities for approximately 300 local small and medium-sized enterprises, particularly Bumiputera-owned firms to participate more actively in the Halal industry. In light of the post-COVID-19 situation, the Minister explained that such loan concepts would assist small and medium scale businesses meet their goals in the halal sector. He also stressed the importance of collaboration between Islamic financial institutions and the HDC in similar schemes that benefit the economy.
As of December 2020, there were nearly 6,727 small- and medium-size Halal certified companies. He noted that only 1,507 of these SMEs dealt with exports, so there is still much room for growth. The preliminary Halal Industry Master Plan included RM19 billion as its target. By contrast, the total Halal exports have exceeded the target to reach RM31 billion.
Chief executive officer (CEO) of Bank Islam Mohd Muazzam Mohammed noted that the GO Halal SME Financing Program will offer training and halal advisory services, funding Halal certification processes, Takaful contributions, working capital, and capital expenditures.
SME contribution to the economy, increased from 38.9% in 2004 to 38.9% in 2019, according to data released by the Department of Statistics Malaysia (DOSM) in July last year.
As part of the program, the entrepreneurs are not required to put up collateral to obtain financial assistance. It is still mandated to be an HDC member with an active business that was profitable in a minimum of one year.
The program finances sole proprietorships and partnership businesses from RM100,000 to RM1 million, and Sdn Bhd businesses from RM100,000 up to RM3 million repayable within 7 years.
According to S&P Global Ratings, the Islamic finance industry is worth $2.2 trillion, and is expected to grow 10%-12% in 2021-2022. As a result of the high bond issuance, Islamic finance markets have gained ground.