MIPR explains why collateral not lowered for loans to SMEs

National 2 minutes, 18 seconds


THE non-performing loans (NPL) or repayment of credit by the small and medium enterprises (SMEs) in the Enterprise Facilitation Scheme (EFS) and the Micro-Credit Financing Scheme (MFS) is acute despite efforts made by the Ministry of Industry and Primary Resources (MIPR) to overcome this problem. They are therefore maintaining their collateral levels.

This was disclosed by a Senior Government Officer from MIPR who is also part of the management for the EFS and MFS schemes when asked to respond to issues raised by SMEs on the collateral levels and the upgrading of the schemes that were disclosed during the fifth session of the Legislative Council (LegCo).

In a statement to the legislative council, Minister of Finance II, Pehin Orang Kaya Laila Setia Dato Seri Setia Haji Abd Rahman Hj Ibrahim announced the MIPR will enhance its efforts to assist SMEs through the EFS and MFS by increasing the maximum credit line from $1.5 million to $5 million for the EFS with a payment tenure of 10 years from the current seven years. The MFS maximum credit line was extended from $30,000 to $50,000 and payment period was extended from four years to five years.

However, according to SMEs, the schemes will remain beyond their grasp as the collateral levels were still too high. The SMEs also stated that should MIPR be ready and willing to assist them, they should lower the collateral rather than increase the payment period or credit line.

The collateral level, according to the officer, is set to ensure that SMEs that wish to apply for the credit is financially fit to ensure not only to maintain a sustainable business but also to ensure the repayment period is complied with. "Our (collateral) standards are the same as our regional partners and it is (flexible) depending on how financially fit the applicants are," he said.

The current application includes a Personal Guarantee (not the applicant), fixed assets and fixed deposits. However, he added that these stipulations are flexible depending on the risk assessment of each SME type of business or project. Lesser risk, he added, will attribute to lower collateral needs.

The schemes were introduced in 1997 by the government in order to finance high-risk ventures which commercial banks normally shy away from. It is also part of the government's vision to diversify the country's revenue from relying on hydrocarbon resources only. Currently the fund that was set aside for this purpose stands at $100 million but only $40 million has been used and over 100 SMEs are involved in both schemes.

He added that the success rate of the SMEs is also currently below the MIPR expectation. However, the MIPR is looking at all aspects to ensure that the SMEs continue to strive and enhance their efforts of sustainability.

The Brunei Times