A PROMINENT economist has called for the establishment of medium-sized banks to provide funding for local small medium enterprises (SMEs) to effectively cope with the imposition of tariffs.
The country is immersed in a middle- income entrapment status for over two decades and spurring more funding for SMEs to cultivate entrepreneurship and innovation in the macro economy would be beneficial, said Professor Datuk Dr Woo Wing Thye.
The plight of SMEs is now worsened with the possible threats from the US tariffs, forcing many of them, who are export - orientated to seek new markets, he noted.
"But with limited financial capacity, many SMEs cannot grow into multinationals or large corporations, hence there is a rather pessimistic outlook."
Now a fellow with the state public think tank - Penang Institute, Woo said the Malaysian monetary system is underpinned by large banks, which monopolise the funding approval.
Local SMEs find it difficult to obtain loans due to the low revenue margins the debtors may earn in the financial outlook but medium-sized banks can afford such funding, as their borrowing margins are lower compared to mass-capitalised banks.
Big financiers are also eco-centric so a local neighbourhood bank is a better option and a friendlier funder to local SMEs, said Woo during a recent talk here.
There were a few medium-range banks operating in the country, such as the now defunct Ban Hin Lee Bank, which was later merged when the government decided to form large banking groups to fuel economic growth.
According to reports, there are now 27 commercial banks, 16 Islamic banks, 15 investment banks, and two other financial lender institutions.
This brings the total number of banks operating in Malaysia to 60 financiers.
Aside from government-linked companies which also operate banks, there are mostly big paid-up capital financiers, which find it unattractive to fund SMEs, said Woo.
He added that the absence of medium-sized banks, have led to the mushrooming of illegal lenders, who have sprouted up in many townships.
But such form of lending, including those from the online circle, are risky, as they are unregulated and have dubious repayment schemes, said Woo.
There is a need for more funding to drive the local SMEs so they become more competitive and can stimulate domestic consumption by creating more jobs while also helping to raise wages, which have not risen comparing to the inflation rate.
Woo also said that Malaysia as an integral part of the regional grouping of ASEAN, can raise the possibility of joining the "Middle Power" club of nations such as Japan, France and South Korea.
This can create new trade blocs and reduce the trade dependence on the world's top superpowers of US and China.
Woo suggested that middle powers in Europe and the Asia Pacific should form a partnership to sustain global economic growth.
The partnership can delve into three core areas; a free trade area, a nonpartisan peace caucus to propagate pace and a sustainable development agency.
This agency can be entrusted to help member countries achieve net zero emission of greenhouses gases, said Woo.
"Middle Powers such as Asean become collateral damage when they are prawns in the proxy wars of superpowers," said Woo. - May 15, 2025.
