The Finance Ministry’s RM350 million soft loan scheme, channeled through its unit, Perbadanan Usahawan Nasional Bhd (PUNB) for small and medium-scale enterprises (SMEs), saw a 60% failure rate since PUNB started to give out the loans in 1993.
“The rate of failure for SMEs is 60% while the rate of failure for loans to the retail sector was between 10% and 15%,” PUNB chief executive officer Datuk Mohd Nasir Ahmad said on Feb 14.
The high failure rate was due to the 1997 Asian economic crisis, which wiped out RM100 million worth of projects and forced many newly formed companies to close shop, he said after PNUB’s national entrepreneur networking gathering in Kuala Lumpur.
“Newly formed companies needed at least two to three years to be able to stand on their own. Since the projects were scheduled for 1997, most of those companies did not make it,” he said.
Nasir said entrepreneurs were too dependent on government contracts to survive, or business ventures which were beyond their capability, and losing interest in the business.
He said PUNB had a 30% success rate in retrieving the loans and it expected good recovery, as most loans were asset-backed.
He said the Finance Ministry would allocate another RM125 million for soft loans in 2006. Of the amount, RM30 million would be for SMEs, RM50 million to the retail sector, RM40 million to wholesalers and RM5 million for graduates to start their own retail business.
Since 1993, PUNB had developed 98 Bumiputera SME companies and created 360 Bumiputera entrepreneurs. The development of these companies involved an investment of RM350 million.
Under the Bumiputera Entrepreneurs Development Project in Retailing (Prosper), launched in August 2000, there were 2,000 entrepreneurs in 902 retail projects with project costs reaching RM238 million, of which PUNB invested RM114 million.