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@ Halal | November-December . 2022

BY FATIHAH MANAF

As proof of the Bank ’ s commitment to ensuring the creation of a positive and lasting impact on society , the economy and the environment through its SME Banking division , Bank Islam developed a new SME product , the SME Smart Eco Financing ( ECO ). This financing programme enables SMEs to finance their investments in green sustainability , whether as Producers or Users .

“ ECO is designed to encourage investments in the green technology industry , whether for producing green products as a Producer or purchasing green technology for adoption as a User ,” explained Rizal Yusof , the Director of SME Banking , Bank Islam .

“ Producers may be able to use ECO as capital expenditure to produce green products , whereas the Users may apply it for utilising green technology . ECO is also available to finance working capital .

“ The Producer , for example , is a company that produces solar panels . Yes , we can finance that . On the other hand , Users will be companies that purchase solar panels from the Producer ,” he added .

Bank Islam sets some requirements for the application of ECO . For SMEs to apply for this financing , they must be :

• A Sdn Bhd or Private Limited Company , Sole Proprietorship / Partnership that falls within the SME definition outlined by SME Corporation Malaysia ( SME Corp ).

• The business must be in operation for at least two years .

• The company has been profitable for at least one ( 1 ) out of the last two ( 2 ) years . “ Users usually require less financing , so we allocate up to RM5 million per User . Meanwhile , green technologies are expensive and require huge capital , so we allocate up to RM15 million per Producer .”

Objectives of SME Smart Eco Financing

Whilst green initiatives might not be SMEs ’ main priority at the moment as they focus on keeping afloat due to economic challenges , Rizal opined that these companies would eventually move into the ESG-compliant direction due to the demand from the industry . Therefore , Bank Islam ' s objective in developing the product is to promote and facilitate SMEs ’ adoption of green and sustainability practices .

“ ECO enables companies to acquire or purchase assets listed under the MyHijau Directory and verified as green technology assets by the Malaysian Green Technology and Climate Change Corporation ( MGTC ),” said Rizal .

The financing also helps widen the coverage of green services to include solar leasing activity .

Benefits of SME Smart Eco Financing Rizal highlighted that ECO would benefit

Rizal Yusof

SMEs that produce or adopt green technology for their business . The product enables SMEs to purchase business inventory , equipment or services relating to sustainable initiatives ( for Producer ) and sustainable practices ( for User ).

THE Malaysian Investment Development Authority ( MIDA ) introduced the Domestic Investment Strategic Fund ( DISF ) in 2012 to accelerate the transition of SMEs to higher value-added , high-technology , knowledgeintensive and innovation-based industries . On Mar 10 , 2022 , Bank Islam Malaysia Berhad signed a Memorandum of Agreement with MIDA with a common goal between both parties , aimed to help SMEs on matters relating to high technology , digital transformation and business growth .

“ Customers of ECO are eligible to benefit from Government Tax Relief , Incentives and Discount under the Green initiative . So they have Green Investment Tax Allowance ( GITA ) and Green Income Tax Exemption ( GITE ) under the MGTC .

“ Another one is the extension of Investment Tax Allowance ( ITA ) for the purchase of green technology assets and Income Tax Exemption ( ITE ) on the use of green technology services and systems under the Malaysian Investment Development Authority ( MIDA ).”

ECO also contributes to achieving the government ’ s target for Malaysia to be a net zero emission economy by 2050 on sustainable energy , including Renewable Energy ( RE ) and Energy Efficiency ( EE ). It supports the government ’ s initiative on green technology

“ As an Islamic financial institution , the collaboration between MIDA and Bank Islam will support MIDA members with the provision of comprehensive Shariahcompliant financial solutions ,” said Rizal Yusof , the Director of SME Banking , Bank Islam .

“ DISF is like a matching grant , where MIDA will provide the matching grants to its members , but the grant recipients need to invest their money first . This is where Bank Islam bridges the gap by providing financing to MIDA members . Once the members complete