International Business Review

Search

Enhancing Rural Enterprises
SMEs in rural areas are mostly focused on small-scale home manufacturing of food and textiles, and many rural entrepreneurs are not aware of the various schemes designed to help them raise funds.

image
by IBR SME
23 March 2015
0 Comments

Comprising approximately 7.9 million people out of 29 million or more than a quarter of the population, and contributing to 12% of the GDP as well as 11% of employment, the rural sector has a place of significance in Malaysia. For one thing, given that bumiputeras make up more than 90% of the rural community, enhancing their living standards is key to realising the national mission of raising bumiputera socio-economic profile. In addition, both the Government Transformation Programme (GTP) and Economic Transformation Programme (ETP) call for the development of the rural economy, for Malaysia to reach the target of being a high-income nation by the year 2020.

Given Malaysia’s rich natural resources and agricultural products, which include oil palm, rice, sugar, rubber, the aim is to make participation in the rural economy seem attractive and viable to the youth in rural areas.

The focus, naturally, is on SMEs. After all, they are the backbone of the economy and any attempt to develop the rural sector needs to take them into account. However, a vast majority of such businesses are microenterprises with less than five employees. One common problem that many of them face is difficulty in obtaining financing.

This is because of several reasons. For instance, some may not qualify for conventional loans offered by commercial banks because of a lack of security. Another factor is that many rural business owners are not aware of the funding opportunities available to them, such as those offered by a number of developmental financial institutions and agencies.

parts

One such programme is the Rural Economic Development Scheme (SPED) by SME Bank. Specifically for wholly bumiputera-owned micro-and-small enterprises in rural areas, this Sharia-compliant facility provides collateralfree financing at low-repayment rates.

Aside from SPED, SME Bank also has the Rural Economic Development Scheme for Indian Community (SPEDI) which is an initiative for Indian entrepreneurs in rural areas, particularly those in the pottery industry.

Another developmental financial institution involved in the funding of rural entrepreneurs and SMEs is Agrobank, which is committed to the development of the agricultural sector. Among the resources it offers are the Youth Agriculture Scheme and the Agriculture Entrepreneurs Scheme for Graduates, both of which cater for young adults hoping to start a business in agriculture.

Having access to financing allows rural SMEs to significantly improve themselves. It does not only enhance the rural economy, it also bridges the development gap with the urban sector. In addition, it is the national objective to create world-class rural industries that are competitive and able to penetrate global markets.

Related Post