An investigation into SMEs' perceptions of credit guarantee corporation (CGC) Malaysia berhad: A case study of Islamic guarantee scheme in Malays

Abstract

Small and Medium Sized Enterprises (SMEs) are considered as backbone of the national economies, whether developing, or developed nations, due to their contribution to economic growth and capital accumulation. In Malaysia, therefore, the government has formulated various strategies to encourage development of the SMEs with the objectives of economic growth, capital accumulation and creating employment opportunities. One of such strategies resulted in the formation of Credit Guarantee Corporation, as a guarantor for the SMEs. The booming phenomenon of Islamic finance especially in Malaysia has influenced the CGC to come up with Islamic guarantee scheme, parallel with the demand of Islamic financing products in the country. However, since the scheme was introduced by the Corporation, in general, the performance of the Islamic guarantee scheme has not performed as expected and has not been as competitive as the conventional guarantee scheme, even though the scheme has recorded positive growth for its products since the inception. This study, therefore, aims to explore the various demand conditions for the Islamic guarantee scheme with the objective of finding possible solutions for the gaps exist in the scheme. A survey schedule was conducted through e-mail questionnaires directed to the SME entrepreneurs. The data was analyzed by using SPSS version 15. The findings indicate that there are some gaps in the scheme's operations pertaining to promotional aspects, product development, staff competency, and government involvement. Hence, the effectiveness of the Islamic guarantee scheme can be questioned, although, undeniably there are some who have benefited from the services. It should also be stated that the majority of the entrepreneurs, due to such reasons, are excluded benefiting the positive side of the Islamic guarantee scheme due to the glitches in the system. This study, therefore, concludes that improvements related to various aspects of the CGC are needed in order to ensure that the Islamic guarantee scheme is continuously expanding in the future.