ABM explains long turnaround time for loans disbursement for SMEs

KUALA LUMPUR: The lengthy turnaround time for the disbursement of loans to small and medium enterprises (SMEs) is due to factors such as completion of security documentation and compliance of terms and conditions, which prolong the process, according to the Association of Banks in Malaysia (ABM).

The association was responding to an article reported by a local daily stating that the actual disbursement of funds to SMEs could take up 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 the 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 supporting SMEs in their business and are constantly looking at ways to further reduce the turnaround time for disbursement of loans to SMEs, especially in light of the increasing approach towards digitalisation.”

ABM said among the reasons cited for longer processing periods are for 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 predisbursement 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 straightforward for clean and unsecured loans as the turnaround time from approval to disbursement is not long.

ABM recommended SMEs which are in search of loans or financing to explore the new online ImSME platform – www. imsme.com.my.