Bank Negara Launches Low Carbon Transition Facility for SME

As revealed by the Minister of Finance during his Budget 2022 speech, Bank Negara Malaysia (BNM) is launching two new facilities under its Fund for SMEs, the Business Recapitalisation Facility (BRF) and the Low Carbon Transition Facility (LCTF).

BNM's RM1 billion LCTF helps SMEs implement sustainable business practices for long-term success. According to the Facility's design, financial institutions will match the LCTF with RM1 billion of their own funds. This Facility supports the government's goal of making Malaysia a net-zero-emission economy by 2050.

Governor Nor Shamsiah stated that in order to move forward, SMEs must implement sustainable practices in their company operations. "The LCTF encourages this and supports the financial industry to innovate their product offerings to facilitate businesses embed sustainability and recalibrate their business operations and processes."

What is Low Carbon Transition Facility (LCTF)?

The LCTF is a financial instrument designed to encourage and support SMEs adopting sustainable business practices.

Who can apply for LCTF, and what are the requirements?

SMEs from all industries have pledged to adapt their operations to be low-carbon and environmentally friendly.

SMEs should inquire about their eligibility for the facility with any of the partner financial institutions. The partnering financial institution will evaluate all funding applications.

Under the LCTF, what are the projects or activities eligible for financing?

The LCTF can be used to fund capital expenditures or working capital in order to start or speed up the transition to low-carbon, sustainable operations.

These activities include, but are not limited to:

Acquiring sustainability certification.
Boosting the use of sustainable materials in manufacturing.
Enhancing the energy efficiency of buildings and appliances.
Installing renewable energy on-site generation equipment.

Maximum financing amount & tenure

Eligible SMEs will be able to acquire finance of up to RM10 million per SME over a 10-year period.

Financing rate

The highest financing rate, including the guarantee fee, is 5.0% per year.

When will the LCTF be available?

The facility will be open from February 3, 2022, until it is fully utilised.

The fund size for LCTF is RM 1 billion, with an additional RM1 billion from participating financial institutions.

Which banks provide financing under LCTF?

Affin Bank Berhad / Affin Islamic Bank Berhad
Alliance Bank Malaysia Berhad / Alliance Islamic Bank Berhad
Al Rajhi Banking & Investment Corporation (Malaysia) Berhad
AmBank (M) Berhad / AmBank Islamic Berhad
Bangkok Bank Berhad
Bank Islam Malaysia Berhad
Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat)
Bank Muamalat Malaysia Berhad
Bank of China (Malaysia) Berhad
Bank Pembangunan Malaysia Berhad
Bank Pertanian Malaysia Berhad (Agrobank)
Bank Simpanan Nasional
CIMB Bank Berhad / CIMB Islamic Bank Berhad
Export-Import Bank of Malaysia Berhad (EXIM Bank)
HSBC Bank Malaysia Berhad / HSBC Amanah Malaysia Berhad
Hong Leong Bank Berhad / Hong Leong Islamic Bank Berhad
Malayan Banking Berhad / Maybank Islamic Berhad
MBSB Bank Berhad
OCBC Bank (Malaysia) Berhad / OCBC Al-Amin Bank Berhad
Public Bank Berhad / Public Islamic Bank Berhad
RHB Bank Berhad / RHB Islamic Bank Berhad
Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank)
Standard Chartered Bank Malaysia Berhad / Standard Chartered Saadiq Berhad
United Overseas Bank (Malaysia) Bhd

Is LCTF a standardised facility?

No. Small businesses should contact any of the partner financial institutions to determine the best facility for their transition needs.

Can SMEs get the LCTF to refinance existing financing or credit facilities?

The LCTF cannot be used to refinance current credit or financing arrangements.

Under the LCTF, do SMEs need to provide collateral to get financing?

No, the LCTF does not demand collateral.

What should an SME do if its application is rejected?

If an application is turned down, the SME should:

Seek clarification from the participating financial institution on the reason(s) for rejection; or
If the SME has not done so already, consider submitting the application via the imSME platform; or
Obtain financing advisory services through MyKNP (Khidmat Nasihat Pembiayaan), which provides advisory assistance and tips to improve eligibility for future financing and alternative sources of finance at myknp.com.my; or
Channel inquiries or complaints to Bank Negara Malaysia via eLINK.

For more information, please visit https://www.bnm.gov.my/-/new-bnm-funds-sme-brf-lctf