Banks helping SMEs beyond financing
Najihah S 

FINANCIAL institutions are fast recognising the potential of small and medium-sized enterprises (SMEs) in the country. These institutions are now seen as acting as agents of change in the SME landscape.

Not only are they becoming an accelerator for SME growth in terms of extending financial aid, but also providing relevant industry insights.

There is an increase in the number of banks organising start-up pitch sessions to know what these entrepreneurs are able to develop. Some of these banks include AmBank Bhd, Alliance Bank Malaysia Bhd and SME Bank.

AmBank, the sixth largest bank in the country, aspires to be the top four in the SME banking sector by 2020. To-date, SME businesses contribute to about 13% of AmBank’s revenue and the bank is targeting it to grow to 25% by 2020.

It is targeting to disburse RM7 bil worth of loans to SMEs by 2020, with RM4 bil to be approved by March next year.

AmBank sees itself as a bank that will help SMEs, especially the mid-tier category to scale up and be export-oriented.

Yap says that the zeal demonstrated during (by SMEs) the conferences was overwhelming

“Last year’s statistics showed that in the banking industry, RM7 bil of loans by SMEs became non-performing loans (NPLs). When asked why these companies were not able to pay back loans, they will respond that it is due to stiff competition,” AmBank business banking MD Christopher Yap tells FocusM.

“We went deeper and we discovered that the issue is actually management-related. The typical structure of an SME is usually led by the founder and the shareholders are either the spouses or family members. Because of that, they are not able to scale up,” he explains.

Inculcating good leadership skills

Having good leadership is important for companies’ growth. As a way to inculcate better leadership, AmBank organised a roadshow called BizConference, whereby experts shared their insights on how to implement a paradigm shift in an organisation.

Leadernomics CEO Roshan Thiran, who was one of the speakers, points out that there are four constraints that could stagnate the growth of an SME and one of them would be the leader himself.

He believes a leader should be able to not only be visionary, but must also be able to create a sustainable business model, culture and system.

Meanwhile, REA Group CEO Haresh Khoobchandani highlights that it is important for a company to have workplace diversity where employees of different backgrounds can be a major asset.


From cradle to IPO

The BizConference, which is the introductory promotional campaign to AmBank SME BizRACE, was catered to companies that are looking at pitching their ideas to scale their business.

SME BizRACE is open to any company that has been operating for more than a year and has a turnover less than RM150 mil annually. The shortlisted companies will stand to win RM2 mil worth of mentoring and management skills programmes.

Understanding the predicament of its clients, AmBank decided to further assist the SMEs by offering the winners leadership development programmes.

“This will help them in three ways, first by being able to scale up the company. This will also help them in being more export-oriented and it also can reduce the failure rate,” Yap says.

AmBank would like to position itself as the retail bank for SMEs. As such it is building relationships with its customers from the cradle to the initial public offering stage.

The contest that would not only involve contestants to present the companies’ business framework to industrial professionals, but they will also be able to participate in talks with industry leaders during CEO chat sessions.

Yap says AmBank BizRACE is different from what other banks are doing. “A lot of banks tend to focus on start-ups but we would like to concentrate on mid-tier companies, the ones that are earning less than RM150 mil.

“Mid-tier companies are comfortable and some do not realise what they fundamentally need for their business model to change. They have plateaud and they need experts to come in and [givethem] advice. It is important for us to provide business know-how alongside the financial help as it will result in improving the state of NPLs.”

The contest, which has already received 500 submissions, will end on Nov 29 and 100 shortlisted companies will be asked to present their ideas early next year.

By January, the top 30 companies will be presenting their ideas before six judges that includes Yap. The rest are Google emerging markets MD Sajith Sivanandan, Credit Guarantee Corporation Malaysia Bhd CEO Datuk Mohd Zamree Mohd Ishak, IOI Corp Bhd CEO Datuk Lee Yeow Chor, DiGi.Com Bhd CEO Albern Murty and co-founders of Fashion Valet Vivy Yusof and Fadzarudin Shah.

The top five companies will compete in May for the grand prize of RM2 mil worth of development programmes.


BizRACE partners

One of the rewards included in the AmBank BizRACE is a subscription to Harvard ManageMentor as well as two seats at the European School of Management & Technology (ESMT).

On the BizRACE partners, Yap says, “We negotiated with them [Harvard and ESMT] for a few months and the discussion is ongoing until the programme is finalised next year.”

Another part of the competition reward would be a field trip to China for a visit to their prominent companies and business districts. Companies such as Alibaba and Tencent are known for innovations and this would give the exposure to local SMEs.

“Beyond financing options, AmBank wants to create a vibrant ecosystem for SMEs. This will also enable us to cater to entrepreneur at the root level with specific knowledge and guidance from our partners, thereby strengthening the industry as a whole.

“We see that lean resources and outdated organisational structures and systems are some factors that hinder the ability to innovate and we want to support SME leaders in overcoming these obstacles,” Yap says.

Banks eyeing the SMEs

GREAT ideas are indeed a priceless commodity, especially in the digital era. However, a great idea might never take off  if its originator does not have a platform to showcase it.

Fortunately, banks recognise the significance of new ideas to stay ahead in business, and they have realised that one of the better ways to gather new ideas is to keep their ears close to the ground. 

This is where pitching sessions come in handy, particularly in the small and medium-sized enterprises (SME)landscape. A lot of SME owners do develop creativity and the ideas that they have can be very useful to both businesses and consumers.

A few banks have been seen organising pitching competition for SMEs, namely Alliance Bank Malaysia Bhd and SME Bank.

Alliance Bank, being one of the first to create such competition, did not only unleash new products and services into the market but it also subsequently made the bank’s SME data pool larger.

The Alliance Smart Biz Challenge is a pitching competition that was first done in 2015 where start-ups come together and present their ideas for a grand prize of RM250,000. Alongside cash prizes, the contestants of the competition will also receive guidance from top business leaders.

SME Bank’s Y Biz Challenge, on the other hand, encourages students from higher learning institutions to present their best business framework to be in the running to win a seed fund worth RM15,000.

This article first appeared in Focus Malaysia Issue 258.