SME Corp Malaysia, a government agency under the Malaysia Ministry of International Trade and Industry, is inviting fund management firms to help raise and manage its risk capital investment fund (Fund IV) under its SME Investment Partner (SIP) programme.
The fund will provide capital financing between RM500,000 ($125,550) to RM5 million ($1.26 million) to small and medium enterprises, particularly those at the early-stage – between 3-5 years of operations – in the form of debt and/or equity, according to a request for proposal on its website.
“In exchange for agreement and selection to manage the fund within certain policy parameters established by SME Corp and investors in the fund, SME Corp is offering to commit to invest between RM20 million ($5 million) to RM40 million ($10 million) in the fund in the form of Redeemable Convertible Preference Shares, which is loan convertible to equity at 2 per cent.
“A fundamental obligation of the SME Partner will be to raise a required minimum of RM30 million ($7.53 million) to RM60 million ($15.1 million), inclusive of the SME Corp commitment, in the form of share capital and other contributions from the investors in the fund,” said the proposal.
To be eligible, foreign and local applicants should be registered with the Securities Commission Malaysia and are experienced in managing funds and SMEs business cycles, among other criteria.
Proposal submissions must be made to SME Corp Malaysia by June 11, 2018.
According to the agency’s 2016 annual report, it said that SIP “is moving ahead with 3 fund management firms referred to as ‘SME Partners’ appointed by SME Corp Malaysia to date.”
“SME Corp Malaysia has appointed 3 fund management firms referred to as ‘SME Partners’, whereby an allocation of RM15 million ($3.77 million) from the government has been channelled to the first ‘SME Partner’ that is currently in the process of raising funds from private investors to be matched with the RM15 million.
“Once a minimum fund size has been reached, the ‘SME Partner’ will start investing in potential SMEs,” it said without further elaboration on the fund manager and investment amount deployed.
In Malaysia’s Budget 2018, former prime minister and finance minister Najib Razak had allocated RM200 million ($50.22 million) to SME Corp Malaysia for training, promotional and financing purposes.
In Budget 2015, the agency had received an allocation of RM375 million ($94 million) specifically for SIP for five years in the forms of loans, equity or both, with RM250 million ($63 million) from SME Bank and the remaining RM125 million ($31 million) from the private sector.
In 2017, the Malaysian government had projected that the contribution of SMEs to the country’s GDP will exceed 40 per cent this year.