BANDAR SERI BEGAWAN – Revenue from micro, small and medium enterprises (MSMEs) has risen by five percent to $8.3 billion between 2010 and 2015, making up more than a third of Brunei’s GDP, it was disclosed on Thursday.

Citing significant growth, Autoriti Monetari Brunei Darussalam Managing Director Yusuf Hj Abdul Rahman said MSMEs contributed to 38 percent of the sultanate’s GDP in 2015, identifying them as the main drivers of economic diversification.

In his welcoming remarks at the inaugural “Getting Credit Conference” he noted that local MSMEs contribution to national revenue had risen from $7.9 billion in 2010 to to $8.3 billion in 2015.

MSMEs also employ four out of every ten individuals in the working population, according to data from the Department of Economic Planning and Development.

Access to financing improving for local businesses

Focusing on credit infrastructure, the conference gathered experts to discuss providing greater access to finance to the community, particularly MSMEs.

According to the World Bank’s Doing Business 2019 report, Brunei Darussalam has experienced a “significant rise” under the getting credit indicator, ranking first along with New Zealand.

Managing Director of AMBD Yusuf Hj Abd Rahman giving his welcoming remarks during the Getting Credit Conference held on Nov 15, 2018. Photo: Courtesy of AMBD.

This is due to the reforms that have been put into place including the Collateral Registry System (CRS); the enactment of the Secured Transaction Order (STO); as well as the implementation of credit scoring earlier this year, said the AMBD managing director.

The CRS entails that any movable property can act as collateral for loans, provided that the lender deems the item to be creditworthy. This was previously not accepted, as business loans required fixed assets such as land or property as collateral.

“Looking into the corporate lending data collected by AMBD in 2018, there is an increase in the corporate portfolio where the amount has risen from $2.2 billion in September 2017 to $2.5 billion in September 2018,” Yusuf said.

He urged banking institutions to collaborate more with Darussalam Enterprise (DARe), Brunei’s statutory body for MSMEs, to further service the financial needs of MSMEs besides “providing capacity development and entrepreneurial training.”

The AMBD chief also stressed the important role financial institutions play in the ensuring a “complete and conducive eco-system for MSMEs development and growth”, particularly their ability to access finance or capital.

“In enhancing greater access to credit to the MSME sector, we all can potentially strengthen a vital building block for economic growth and prosperity,” he said.

The Credit Bureau under AMBD has been actively trying to expand its data coverage beyond traditional credit information from banks by including utility information from telco providers as well as exchanging credit information with Bank Usahawan, an SME bank.

With the Credit Bureau’s Credit Score, financial institutions can access a borrower’s credit report to assess their credit-worthiness, mainly to reduce non-compliance risk to the lenders and ensure borrowers will not be overburdened by debt.

Manager of the Credit Bureau, Farah Kong, believes more should be done to grant greater access to finance for MSMEs in Brunei, saying there are still segments of the community who are financially excluded.

Manager of the Credit Bureau under AMBD, Farah Kong, speaking during a panel at the Getting Credit Conference 2018. Photo: Wardi Wasil/The Scoop

“Yes, there are [credit] infrastructures in place, and yes there are reforms that have been introduced in Brunei to improve access to finance but there is still a gap,” she said during one of the panels.

Farah said this as a response to a fellow panelist who questioned Brunei’s Ease of Doing Business initiative due to some enterprises being excluded from accessing finance.

She explained that some enterprises may be excluded from financing because they cannot comply with the requirements set by the banks.

“There is still a lack of expertise to better cater the undeserved or financially excluded. That is something we as an industry have to tackle.

“Its not just about establishing the infrastructure to guarantee access [to finance], but a collaborative effort to ensure that the participants in the credit infrastructure field are equipped with the knowledge and expertise to cater to these various customer segments.”

The Getting Credit Conference also saw the managing director of AMBD officiate the launch of “National Credit Scoring” and “Online Credit Report”.