RECOMMENDATIONS TO THE GOVERNMENT ON HOW BANKS SHOULD SUPPORT SMEs
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PRESS STATEMENT BY MOVEMENT FOR MONETARY JUSTICE MALAYSIA
15th September 2021
1. A Development Financial Institution (“DFI”) by definition is an Institution meant to develop a country. In Malaysia our DFIs, Bank Pembangunan Malaysia Berhad (“BPMB”) is meant to develop the country’s infrastructure whereas Bank SME is to develop the SME sector in Malaysia. The SME sector in Malaysia in line with the world position is a key economic sector that delivers 70% of our Nation’s jobs and contributes almost 40% of our GDP.
2. Now we would have thought every assistance would be given to our DFIs so that it can maximise its delivery to the nation, maximizing economic output and employment. We would have thought that DFIs would be allowed to be a money creator too, instead of strangely confining that privilege to commercial banks only. Instead we see our DFIs are just another victim of our unthinking monetary system; specifically of our unending awe with Western systems, and our fear to challenge the status quo even if it goes against reality and common sense, and sadly even if it goes against the real dictates of our religion. DFIs are funded by grants mainly. A meagre source of funds compared to being given a money creation ability.
3. Yes a bank is usually a money creator; it is no longer what economic textbooks say, an intermediary that lends from deposit. Government policy makers must digest this fact, and if they do they will realise it is the single most important factor in economic policies today. It is the defiance/ ignoring of this fact which continues to put the space of national economic policy making in the current helpless and clueless limbo.
4. A money creator is a prime mover in an economy. Wherever the money hose is pointed to, or in a language better understood perhaps, in whichever area the Banks’ Credit Committees decide to focus loan approvals on, that is the area that will experience the most economic development in a nation.
MC72 Zahid Aziz, [1/10/2022 12:49 PM]
5. If the banks point their money hose to houses, house prices will rocket; if the banks point their money hose to personal loans and credit cards inflation will rocket; and if the banks point their money hose to the manufacturing and service sector economic output and employment will rocket.
6. Those are the simple real economics of today which economic policy makers must master. Investments comes from Banks’ Credit Committees’ approval, not from a built up of savings. The latter belief may pass economics students their exams but it doesn’t cut it in the real world anymore.
7. Back to DFIs, it therefore goes without saying that they must be money creators so that they can have access to the money and point the money hose to the real sector. It is a sad day when the Finance Minister of a Nation asks the DFIs to focus their help in helping the economy, in funding the SME sector, without giving them access to the weapon they most need!
8. And yet again the elephants in the room are ignored; the strangely privileged, money creating commercial banks. The two biggest Banks in the nation, Maybank and CIMB only directs 34% and 30% of their loans respectively, to the real sector: a whopping 66%-70% loans to the inflation wrecking sector of personal loans and similar. A general cannot win the war if he can’t see and understand the battlefield.
9. The Movement for Monetary Justice urges the government to urgently direct Maybank and CIMB to reverse their loans/financing portfolio to 70% to the real sector and 30% to the personal sector. And just in case the other banks feel excluded from this narrative let us tabulate below their ratios of loans to the real vis a vis the personal sector.
10. And when one does not give one’s DFIs the right to create money, BPMB’s and SME Bank’s total loans and advances are only RM15 billion and RM7.1 billion respectively, compared to Maybank’s and CIMB’s RM511 billion and RM365 billion respectively. And if the point is not yet clear, Maybank’s loans and advances to the Personal Sector is RM337 billion and CIMB’s RM256 billion; BPMB’s and SME’s RM15 billion and RM7.1 billion respective loans and advances to the real sector, dwarfs in comparison, a mere drop in the ocean.
11. We end our report with a tabulation of China’s Top Banks’ performance which displays an economy powered by Public Banking, compared to Malaysia’s economy powered by Private Banking. Although at 66% and 60% ownership by State Institutions respectively makes them a public bank by definition, it is a wonder why Maybank and CIMB are allowed to act as Private Banks!
12. The top 4 banks in China are majority owned by the State; they are also now the 4 biggest banks in the world. Their focus in on the Real Economy, not the Personal Sector as with Malaysian banks. As a result, they have brought tremendous growth to their nation. Current GDP of China is USD14,600 billion with a current average growth rate of 6.1% pa.
𝐓𝐡𝐞 𝐌𝐨𝐯𝐞𝐦𝐞𝐧𝐭 𝐟𝐨𝐫 𝐌𝐨𝐧𝐞𝐭𝐚𝐫𝐲 𝐉𝐮𝐬𝐭𝐢𝐜𝐞 𝐫𝐞𝐜𝐨𝐦𝐦𝐞𝐧𝐝𝐬 𝐭𝐡𝐞 𝐠𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 𝐚𝐝𝐨𝐩𝐭 𝐭𝐡𝐞 𝐟𝐨𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐰𝐢𝐭𝐡 𝐢𝐦𝐦𝐞𝐝𝐢𝐚𝐭𝐞 𝐞𝐟𝐟𝐞𝐜𝐭:
𝟏) 𝐀𝐥𝐥𝐨𝐰 𝐁𝐏𝐌𝐁 𝐚𝐧𝐝 𝐒𝐌𝐄 𝐁𝐚𝐧𝐤 𝐭𝐨 𝐡𝐚𝐯𝐞 𝐦𝐨𝐧𝐞𝐲 𝐜𝐫𝐞𝐚𝐭𝐢𝐨𝐧 𝐚𝐛𝐢𝐥𝐢𝐭𝐲. 𝐈𝐧 𝐨𝐭𝐡𝐞𝐫 𝐰𝐨𝐫𝐝𝐬 𝐚𝐥𝐥𝐨𝐰 𝐭𝐡𝐞𝐦 𝐭𝐨 𝐛𝐞 𝐚𝐛𝐥𝐞 𝐭𝐨 𝐨𝐩𝐞𝐫𝐚𝐭𝐞 𝐂𝐮𝐫𝐫𝐞𝐧𝐭 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐬.
𝟐) 𝐑𝐞𝐯𝐞𝐫𝐬𝐞 𝐌𝐁𝐁 𝐚𝐧𝐝 𝐂𝐈𝐌𝐁 𝐥𝐨𝐚𝐧 𝐚𝐧𝐝 𝐚𝐝𝐯𝐚𝐧𝐜𝐞𝐬 𝐫𝐚𝐭𝐢𝐨𝐬 𝐟𝐫𝐨𝐦 𝟑𝟎% 𝐑𝐞𝐚𝐥 𝐬𝐞𝐜𝐭𝐨𝐫 : 𝟕𝟎% 𝐏𝐞𝐫𝐬𝐨𝐧𝐚𝐥 𝐬𝐞𝐜𝐭𝐨𝐫, 𝐭𝐨 𝟕𝟎% 𝐑𝐞𝐚𝐥 𝐬𝐞𝐜𝐭𝐨𝐫 : 𝟑𝟎% 𝐏𝐞𝐫𝐬𝐨𝐧𝐚𝐥 𝐬𝐞𝐜𝐭𝐨𝐫.
𝟑) 𝐀𝐩𝐩𝐥𝐲 𝐬𝐢𝐦𝐢𝐥𝐚𝐫 𝐫𝐮𝐥𝐢𝐧𝐠 𝐭𝐨 𝐚𝐥𝐥 𝐨𝐭𝐡𝐞𝐫 𝐛𝐚𝐧𝐤𝐬 𝐢𝐧 𝐌𝐚𝐥𝐚𝐲𝐬𝐢𝐚.
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Dikemaskini [Updated]: Sam Ahmad 20220111