Securing financial resources for small and medium contracting firms in Malaysia

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Date
2008-06
Authors
Lau, Anna Siew Lin
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Publisher
Universiti Sains Malaysia
Abstract
Small and medium enterprises (SMEs) researchers often argue that SME are characterised by lack of capital and are unable to access the same kinds of growth funding. It is also indicates that debt capital is the most important capital source for construction firms. This study examines the loan offered by commercial banks and government agencies to small and medium contracting firms. Specifically, it looks into the loan availability offered by commercial banks and government agencies as well as the characteristics and procedures in getting the loan. Additionally, loan preferences and the reasons of preferences as well as the problems faced in obtaining and repaying the loans by the small and medium contracting firms are explored. Both qualitative and quantitative methods were adopted for two different sample populations, i.e. bank officers and contractors. Data was collected and triangulated using interviews (bank officers), postal questionnaires (contractors) and secondary sources. Four government agencies and 13 commercial banks were interviewed. Postal questionnaires were sent out to 500 small and medium contracting firms all over the Peninsular Malaysia, and 51 companies responded. Results showed that all financial institutions have their own financing programmes for the small and medium contracting firms. Majority of the responding companies preferred loans from commercial banks compared to government agencies. Bumiputera-Commerce Bank and Malayan Banking are the most preferred institutions by the small and medium contracting firms. The reasons are 'cooperative' loan officer, speed and efficiency of the services and shorter application approval period. Responding companies which opted for government agencies cited flexible collateral requirements followed by competitive interest rates. More than half of the responding companies have problem in obtaining loan from both financial institutions. Delay in loan processing time was cited as the most frequent problem faced from both commercial banks and government agencies. Responding companies faced problem in repaying their loans due to delay in receiving progress payments from clients.
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Small and medium enterprises (SMEs)
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