Most SMEs Can’t Get Financing From Banks
By Hadthiah PD Hazair

Brunei-Muara - Only a fraction of small and medium enterprises (SMEs) in Brunei get financing from local banks. Most have absolutely no access to bank financing, according to data gathered by the Brunei Institute of Technology SME Study (BITSS).

More than seven in every 10 (a whopping 76 per cent) of SMEs in the sultanate could not get access to bank financing, the institute said in a study.

Only 18.3 per cent manage to borrow working capital from local banks whilst 5.4 per cent received loans from foreign banks.

Many of the business owners who could not get bank financing dig into personal savings or borrow from informal sources such as family members.

The study also concluded that half of respondents in a study cited bank formalities in giving loans as the biggest crimp towards accessing money for developing their business.

Among factors that deter the banking sector in Brunei from lending to SMEs include the relatively high risk involved due to "high degree of uncertainties, particularly high failure rates (of SMEs) and the effects of economic changes".

As many of the local SMEs are sole traders or partnerships, it also becomes harder for banks to assess the SME's true financial situation due to tax exemption. The law states that businesses categorised under sole traders and partnerships are not required to pay taxes.

The lack of knowledge on how to prepare good business plans also often makes it difficult for banks to understand the financial needs of the SME.

Local banks worry about the inadequacy of certain skills required within the SME for "working capital management", the report said.

Small and medium enterprises account for nearly half or 48.5 per cent of all businesses in the sultanate and provide 92 per cent of total employment in the private sector. Thus, the SME sector in Brunei is a major source of employment creation in the country.-- Courtesy of The Brunei Times

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