The Malaysian Investment Development Authority (MIDA) introduced the Domestic Investment Strategic Fund (DISF) in 2012 to accelerate the transition of SMEs to higher value-added, high-technology, knowledge-intensive and innovation-based industries. On Mar 10, 2022, Bank Islam Malaysia Berhad signed a Memorandum of Agreement with MIDA with a common goal between both parties, aimed to help SMEs on matters relating to high technology, digital transformation and business growth.
“As an Islamic financial institution, the collaboration between MIDA and Bank Islam will support MIDA members with the provision of comprehensive Shariah-compliant financial solutions,” said Rizal Yusof, the Director of SME Banking, Bank Islam.
“DISF is like a matching grant, where MIDA will provide the matching grants to its members, but the grant recipients need to invest their money first. This is where Bank Islam bridges the gap by providing financing to MIDA members. Once the members complete the investment, MIDA will reimburse half of it.”
The financing is eligible for Malaysian SMEs that fulfil the criteria such as:
• Meet the definition of SMEs as issued by SME Corporation Malaysia, with the business in operation for at least two years.
• Malaysians residing in Malaysia, who hold a minimum of 51 per cent shareholding in the business.
• Companies producing promoted products or engaged in promoted activities in priority sectors such as:
• Manufacturing: Aerospace, medical devices & pharmaceuticals, machinery and equipment, & other industries, on a case-by-case basis.
• Services: Research and development (R&D), technical and/or skills training, logistics service providers (3PL) & integrated green technology project.
“A total fund of RM100 million has been set up for this arrangement between Bank Islam and MIDA with up to RM5 million per SME has been
allocated by Bank Islam for this arrangement. However, if the SMEs
have higher requirements, we can go off the shelf and look at a tailor-made solution rather than the one stated
in the package.”
Financing CAPEX and WCR
The financing provided by Bank Islam for DISF under MIDA will allow SMEs to finance Capital Expenditure (CAPEX) for the modernisation and upgrading of facilities and tools so that SMEs can undertake manufacturing or services for multinational corporations (MNCs), Malaysian conglomerates (outsourcing activities), and licensing or purchasing new high technology.
“One is for CAPEX; the other is the Working Capital Requirement (WCR). The working capital financing is to cater for activities such as training of Malaysian employees; R&D activities that are carried out in Malaysia; obtaining international standards/certifications such as JAKIM’s halal certification; legal documentation cost, and BRTT/BLTT contribution cost.”
Rizal said the collaboration with MIDA would provide a platform for over 3000 SME clients within the Bank’s portfolio, giving them the opportunity and access needed to strengthen their business.
“It allows us to develop our SME portfolio and help customers meet their financial needs, enabling them to expand their presence in the local market and more.”