Business

Wednesday January 7, 2009

Companies finding it difficult to get bank loans

By DALJIT DHESI


PETALING JAYA: Despite the Government’s assurance that banks have ample liquidity and the ability to lend, companies – including small and medium enterprises (SMEs) – are facing mounting pressure by the day to obtain financing.

While many successful applications have been overturned, others are having their existing loans reviewed and overdraft facilities reduced. Banks are also limiting the sectors to which they can lend.

Bank Negara’s latest cut in the overnight policy rate and the statutory reserve requirement to reduce the cost of funds appears to have fallen on the deaf ears of many banks.

SMI Association of Malaysia Fund Raising Bureau chairman Steven Lim said in a recent dialogue with various business associations, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had confirmed that banks were in a strong position to lend.

“Contrary to this, Malaysian banks are not heeding the central bank’s advice and are over-cautious when lending is concerned.

“Even the process for deserving applicants can be very tedious. The processing and turnaround time for the loans to be approved can take three to four months in some cases and this can defeat the customers’ business objectives,” he said in an e-mail reply to StarBiz.

To make things worse, Lim added, even deserving applicants in some cases were unsuccessful in their applications and blamed banks for over-reacting to the global economic slowdown and the financial crisis.

About 99% of business establishments in the country consisted of SMEs, which contributed 32% to the gross domestic product (GDP), provided 56% employment and accounted for 19% of total exports last year.

Banking and development financial institutions approved RM63.2bil in funding for over 132,000 SME accounts in 2007, exceeding the target of RM51bil to 110,000 accounts projected for last year.

It is learnt that banks had started reviewing existing loan files to determine whether borrowers (including companies and businessmen) were capable of repayment in the near future, failing which, loans would either be reduced or called back.

A company involved in the iron and steel industry recently had its overdraft facility slashed to half the original approved sum of RM200mil on the grounds that the price of raw materials had plummeted. There are others facing a similar predicament.

According to Lim, banks had also imposed “barred sectors” on certain industries, such as development and construction, used-car dealers and transportation where they were the least to be considered for any loan application.

According to a CEO of a manufacturing company, banks were shoring up their recovery departments in anticipation of “problem” loans expected to emerge next year.

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Standard Chartered Bank (M) Bhd (StanChart) managing director and CEO Julian Wynter, on the other hand, said the bank had not reduced its lending or changed the way it undertook credit assessment – both to individuals and businesses.

“We do not expect a dramatic shift in lending practices. We should expect tightening of underwriting standards in the market but, for StanChart, our standards are already robust and we continue to apply them.

“At the same time there may be a focus on collateral to ensure optimisation of capital so that lending can remain in place and/or lower pricing. These factors will allow a bank to ensure that its asset quality remains strong,’’ he added.

StanChart’s lending to medium enterprises had expanded 40% over the last 12 months from October 2007.

Wynter said the bank’s trade and working capital disbursement pipeline as at Oct 31 was 99% higher than (the disbursement pipeline) as at Jan 31.

According to him, the bank aimed to double its lending to SMEs to RM6bil in 2011.


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