ABM explains long turnaround time for loans disbursement for SMEs

KUALA LUMPUR: The Association of Banks in Malaysia (ABM) said that the lengthy turnaround time taken for the disbursement of loans to small and medium enterprises (SMEs) was due to factors such as completion of security documentation and compliance of terms and conditions which prolongs the process.
The association was clarifying an article reported by a local daily that the actual disbursement of funds to SMEs could take up to three to four months.
"It is not in our member banks' interest to delay the disbursement of loans as it lengthens the processing time, leads to inefficiencies and jeopardises the relationship with their customers. Moreover, from a revenue perspective, the banks would not be able to recognise any income from the loans until the funds have been disbursed to their customers," it said.
"Our member banks are committed to support SMEs in their business and are constantly looking at ways to further reduce the turnaround time for disbursements of loans to SMEs, especially in light of the increasing approach towards digitalisation," it added.
ABM said among the reasons cited for longer processing periods are property loans where consent to transfer or charge is pending; cases where the consent of existing debenture holders is required for collateral to be shared by other creditors; and outstanding issues on the part of the borrower, which may include pre-disbursement conditions not being met such as increase in paid-up capital, execution and submission of relevant documents and settlement of legal fees or expenses.
The association also highlighted that the processes are straight forward for clean and unsecured loans as the turnaround time from approval to disbursement is not long.
Alternately, loans that are backed by property may require the consent from relevant authorities or third parties which are outside the control of the banks. As for cases which require certain conditions precedent to be met, the processing period will be longer.
ABM recommended SMEs which are in search of loans or financing to explore the new online ImSME platform, www.imsme.com.my, which was developed by Credit Guarantee Corporation Malaysia Bhd (CGC) and supported by Bank Negara Malaysia in a bid to bridge the financing gap in the sector.