Industry 4.0 Grants and Financial Support for Malaysia SMEs

“Industry 4.0” was first coined at the start of the 2010s by scientists developing high-tech strategies for the German government. It came into mainstream conversation when it was set as a theme at the 2016 World Economic Forum. Industry 4.0 became a national agenda for us in Malaysia soon after. 

First, the National Policy on Industry 4.0 (also known as Industry4WRD) was introduced to steer the country’s direction from 2018 to 2025. Then, as the COVID19 pandemic raged on, that policy was followed up by two other policies: the Malaysia Digital Economy Blueprint (MyDigital) and the National Fourth Industrial Revolution (4IR) Policy. While all this is happening, we were also preparing for the 5G infrastructure rollout. Telcos and service providers are developing packages and plans for industries, especially among small and medium enterprises (SMEs).

What is Industry 4.0 all about? Essentially it is an ecosystem that came about with recent advancements in interconnectivity. Beyond the consumer market, the Industrial Internet of Things, the generation of real-time data, and the introduction of cyber-physical systems are touted to improve a business’s competitiveness, productivity, and efficiency.

But for most parts, SMEs and the greater business community are rather weary or skeptical about the migration. A lot of the future-proofing conversations are based on what’s to come. Some infrastructures, equipment, technologies, and skillsets are largely unavailable. Acquiring them means incurring costs as SMEs are treading a precarious financial balancing act caused by the public health measures and restrictions designed to combat and contain the COVID19 epidemic over the past 24 months.

The Malaysian Government through the Industry 4.0 policies, the Twelfth  Malaysia Plan as well as the Annual Budgets, have set aside funds earmarked as grants and financial assistance to encourage SMEs to begin their migration to Industry 4.0.

Responses from the SMEs are encouraging. Some funds like the High Impact Fund (HIF) and Domestic Investment Strategic Fund (DISF) facilitated by the Malaysian Industrial Development Authority (MIDA) received overwhelming interest and reached the fund capacity in mid-December 2021. Registration was closed on 17 December 2021 while the program was placed temporarily on hold. MIDA is also the implementing agency for the Industry4WRD Intervention Fund which received an additional RM45 million from the Government. SMEs in the manufacturing and related services sector may apply up to RM500,000 provided on a 70:30 matching basis.

Similarly, the Smart Automation Grant (SAG) managed by the Malaysian Digital Economy Corporation (MDEC) closed the registration for this matching grant for services companies to automate their business processes and move towards digitalization. SAG recipients would receive up to 50% of the total project cost or be subject to a ceiling limit of RM200,000.

Besides these grant schemes, Malaysian SMEs can tap into other Industry 4.0 financial support. Some of them are:

Soft Financing Scheme for Automation & Modernisation (SFSAM) by MIDF

The Malaysian Industrial Development Finance Berhad (MIDF) offers the Soft Financing Scheme for Automation & Modernisation (SFSAM) which, among others, aims to encourage manufacturers to modernize and automate their manufacturing processes. 

Applicants must be companies incorporated in Malaysia under the Companies Act 1965 and the Companies Act 2016. At least 51% of the equity must be held by Malaysians. Besides that, the company needs to have a valid license and/or have been operating for at least two years. 

SFSAM financing amount ranges from RM50,000 to RM20 million per application. 

Items which SMEs use the financing for include: automation financing; operations streamlining and rationalization; tooling acquisition, development, and production; productivity improvement; export enhancement program; purchase of ICT-related equipment including engineering design software or enterprise resource planning (ERP) software; and other miscellaneous expenses associated with the legal documentation as well as engagement of consultants for the purpose of automation.

SME Technology Transformation Fund (STTF) by SME Bank

SME Bank’s STTF helps Malaysian SMEs in the manufacturing and services sector which has operated for at least two years and has a sound financial cash flow to finance the purchase of equipment and machinery, computer hardware and software, IT solutions and services, tech support services as well as other intangible assets aimed at enhancing productivity and efficiency through digitalization and automation

Financing under the scheme ranges from RM100,000 to RM 3 million. The margin of financing goes up to 80% of the cost of machinery or equipment.

SME Bank requires collateral for financing under the STTF. Up to 80% guarantee cover from Syarikat Jaminan Pembiayaan Perniagaan (SJPP). Apart from that, it also requires personnel guarantees, joint, and several guarantees, or corporate guarantees. 

RiSE4WRD for Industry 4.0 by HRD Corp

Human capital and workforce expertise are as essential as having the right Industry 4.0 equipment and facilities. Through the Human Resource Development Corporation (HRD Corp), the Government of Malaysia initiated RiSE4WRD for Industry 4.0 – a program designed to assist SMEs in the manufacturing and associated sectors to build up their workforce. 

Successful firms will receive a maximum allocation of RM25,000 (while each trainee will be given an allocation of up to RM5,000).

The funding for training allows employers to send their personnel for training on connectivity, automation, cyber security, Internet of Things (IoT), cloud computing, big data, advanced simulation, autonomous systems, universal integration, augmented reality (AR), and additive manufacturing or any relevant technology.

Before applying for this grant, SMEs must already complete the Industry4WRD Readiness Assessment (RA) conducted by the Ministry of International Trade and Industry (MITI).

Industry Digitalisation Transformation Scheme (IDTS) by the Malaysia Development Bank

The Malaysian Development Bank (BPMB) offers the Industry Digitalisation Transformation Scheme (IDTS) designed with a threefold objective: (1) accelerate Industry 4.0 adoption by the industry; (2) fund industrial capabilities transformation to support an Industry 4.0 ecosystem; and (3) support digital transformation adoption to develop Malaysia’s digital economy. SMEs may use the facility to part-finance the acquisition or development of these assets, digital technologies projects, or as working capital. The facility comes in the form of term financing as well as syndication/club deal arrangements.

The financing amount is subjected to BPMB’s evaluation and credit policies. Generally, there are two categories. First, an applicant may apply for financing up to RM100 million to acquire or develop assets, hardware, and software. Second, applicants apply for financing in order to develop their infrastructure which goes up to RM100 million.

Partnerships, private limited companies, and cooperatives registered and incorporated in Malaysia may apply for the facility. Unlike the other facilities, the minimum Malaysian ownership for these entities is much lower at 40%.

Automation & Digital Guarantee Scheme (ADGS) by SJPP

SJPP is a wholly-owned company of the Minister of Finance Incorporated set up to administer and manage government guarantee schemes for SMEs. Through these schemes, many SMEs were able to obtain access to financing facilities and encourage financial institutions to offer them better rates, terms, and conditions. ADGS enables SMEs to apply for term loans or term financing, overdraft, trade facilities, and commercial cards to finance their working capital or capital expenditure. The funds, in turn, would be used by the SMEs to invest in automation, digitalization, and modernization in line with Industry  4.0.

Financing limits for private limited companies range from RM100,000 to RM10 million. Partnerships and sole proprietorships are eligible for financing in the range of RM100,000 to RM1 million. The guarantee coverage encompasses 80% of the total financing obtained from the participating financial institutions. That includes both the principal as well as interests or profit.

Migration towards Industry 4.0 provides SMEs with a competitive edge aimed at boosting productivity, efficiency, and management. However, the reality is that Malaysian SMEs are in different industrialized phases. Some are ready for Industry 4.0; others might require substantially more technical and financial support. It is a journey that does not need to be traversed alone by the decision-makers. Fortunately, there are many financial and technical support and the list covered here is not exhaustive.


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