KUALA LUMPUR: SME Bank Bhd, which is in the midst of a five-year transformation plan, has seen improvements not only in its balance sheets, but also in the way business is done and in service delivery.
Financially, the bank, which was set up about seven years ago to cater to the needs of small and medium enterprises (SMEs), returned to the black last year after two years of losses since 2009.
The bank now, according to managing director Datuk Mohd Radzif Yunus, is undergoing significant changes in terms of its business model, target customers, service delivery and people capability.
If previously most of its funds came from the government, now the bank has a mixed portfolio, where some of the funds are raised in the market. The recently launched RM3 billion government-guaranteed sukuk programme is part of SME Bank's alternative funding mechanism.
Radzif said funding is the main driver to strengthen the bank's business model, which he describes as "anti-cyclical".
"This (anti-cyclical) is the model adopted by most DFIs (development financial institutions) in the world, which is to provide a safety net for the economy when the economy is down and other financial institutions unable to meet companies' financing needs," he said in an interview.
Alternative fund raising is necessary as SME Bank needs to release more financing for the SMEs.
Radzif said the SME sector, which currently contributes 34 per cent to gross domestic product (GDP), utilises between RM120 billion and RM140 billion financing.
To reach the targeted 40 per cent SME contribution to the GDP by 2020, he said the SME sector needs between RM360 billion and RM400 billion in financing.
Meanwhile, SME Bank only contributes four per cent to the SME financing market.
"We are targeting a 10 per cent share to enable us to play a safety net role. To reach the 10 per cent target, the bank needs more funding so that we can channel more financing to the SMEs."
To improve service delivery, Radzif said SME Bank has various engagements with stakeholders such as the finance ministry, the international trade and industry ministry, Bank Negara Malaysia as well as its customers.
Some of the bank's customers have been selected to be in TeraS programme, a scheme under Unit Peneraju Agenda Bumiputera which facilitates high-performing Bumiputera companies with good growth potential to expand and grow beyond local market.
"Forty-one TeraS awardees are our customers, representing about 30 per cent of total TeraS awardees," Radzif said.
On the people side, he said SME Bank has collaborative partners to expose the best practices to its employees.