Further to my earlier, rather prolix blog entry on microfinance (read Time to step up microfinance programmes), the M'sian banking system is beginning to mobilise on microfinance products. In the Star Online report entitled Banks upbeat on micro-financing, the focus of banks appears to be on micro-enterprises which are defined as business entities with less than 5 full-time employees and annual sales of less than RM250,000.
Among established financial institutions, the market leader in microfinancing is Agro Bank (formerly Bank Pertanian). It's range of microfinance products are targeted mainly at agro-based activities; check the list here.
Commercial banks are NOT able to provide values-based microfinance
While we should be heartened that the banks share the view that during this period of economic challenge, microfinance is an area to focus on, one cannot help feeling that the established banks like Public Bank and AmBank do not really have the heart nor stomach for microfinance. Their goals are so materially different from Grameen Bank's values in relation to microfinance.
So, we can expect very stringent criteria for microfinance applicants at these commercial banks. While we cannot criticise the risk management criteria of these commercial banks, we have to ask the federal government how genuine microfinance applicants who fail the stringent criteria of the commercial banks can receive any microfinancing. Besides, commercial banks are only targetting small and medium enterprises (SME) only, not the micro-enterprises which are really one-person kari pap and kueh sellers who also need some funds to meet rising costs of production.
Better delivery system needed for microfinance
In other words, if the federal govt takes the view that the effective distribution channel for microfinance is through commercial banks, then the federal govt is approaching the principles of microfinance from a very dubious and cynical starting point. And, left to commercial banks, the RM1.2 billion allocated for SME financing, which is wrongly defined as microfinance, will not reach the truly needy micro-enterprises in Malaysia.
What the govt should do
Instead of wasting time with politics and schmoozing with commercial bankers, the 2nd Minister of Finance, Minister for Agriculture and Minister for Domestic Trade and Consumer Affairs need to get together to organise a better delivery system for microfinance to reach micro-enterprises, mainly in the rural areas and smaller towns.