What is SDRS ?
The Small Debt Resolution Scheme (SDRS) is a platform for financial institutions and SMEs to work out debt rehabilitation solutions amicably and collectively without resorting to legal recourse. In essence, SDRS facilitates the rehabilitation of problematic financing accounts either through restructuring or rescheduling of the SMEs’ existing financing facilities, and/ or providing new financing (if deemed eligible and justified).
It provides assistance to SMEs in all economic sectors that are facing difficulties in servicing their debt with financial institutions, by facilitating:
View MoreRepayment Assistance/ SDRS - a financial reprieve for distressed SMEs
Bank Negara Malaysia (BNM) established the SDRS in 2003 to provide a holistic and conducive SME financing ecosystem. The SDRS is intended to provide assistance to SMEs in all economic sectors constrained by impaired financing or those facing difficulties with financing from multiple banks. These constraints include SMEs that have ceased operations but the entrepreneurs continue to have an interest and ability to repay their financial obligations from other sources of income.
Effective 1 September 2020, looking at the synergistic value, the role and function of the Small Debt Resolution Scheme (SDRS) were then transferred to AKPK. AKPK has since started offering specialised solutions to help SMEs (including micro SMEs) to manage their debt and apply sound financial management practices. With this transfer, AKPK will serve as the one-stop platform for both individuals and SMEs seeking debt restructuring services in addition to financial education and advisory.
AKPK now provides more efficient and holistic debt restructuring and advisory services for SMEs that have loans with multiple banks. Additionally, AKPK is well-positioned with its vast experience and expertise in assisting financially distressed individuals to manage their finances through its structured Debt Management Programme. AKPK plays a key role in strengthening the financial capability of Malaysians through its tailored financial education and counselling programmes.
Who May Apply?
Are you eligible for the Small Debt Resolution Scheme? Financially distressed SMEs may approach SDRS for repayment assistance if:
- They have business financing from participating financial institutions (PFIs) of SDRS
- Owner(s)/Shareholder(s) of the business/company is not an undischarged bankrupt
The role of Financial Institutions in rehabilitating problematic SME financing
View MoreHow Repayment Assistance could
help ease distressed business cash flow?
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As the main financial service providers, financial institutions (banks) continue to play an important role as the first avenue of recourse for financially distressed SMEs. The banks are currently playing a major role in assisting SMEs through their own schemes of loan restructuring, loan rescheduling, debt management or SME repayment assistance package.
Nonetheless, the SMEs must also be equally proactive and forward looking in managing their finances to ensure that their cash flows remain positive, especially during a challenging economic environment. Entrepreneurs having problems to meet their financial obligations are advised to consult and discuss with the respective financial institutions early to work out possible debt solutions to avoid their loans from turning into default and prevent the lending institutions from instituting legal proceedings. If the negotiations fail to reach an amicable solution, the SMEs may consider getting assistance under the SDRS—an independent platform providing a final solution for SMEs to restructure or reschedule their business financing.
Robust engagements between SMEs and their lenders are critical in achieving a reasonable solution for all stakeholders. The problematic financing facility can be restructured via a combination of various worked out strategies, such as interim repayment programme with lower monthly instalments, reduction in the interest rates and conversion of the financing facility (if deemed appropriate under certain circumstances) such as the conversion of Overdraft or Trade Financing Facility to a Term Loan. The objective of the interim repayment programme is to ease the cash flow burden, providing the enterprises with sufficient time to turn around their businesses.
Generally, the new repayment terms with lower monthly instalments will provide the most needed breathing space to distressed SMEs for them to improve their business cash flow without increasing the SMEs’ debt level. Ultimately, the proposed worked out plan or draft provides a win-win solution for both SMEs and banks. The restructuring and rescheduling/ repayment assistance arrangement of problematic financing facilities has continued to be the mainstay in supporting the viability and sustainability of financially distressed SMEs.
The Process
How does SDRS work?
Under the scheme, the financing facility can be restructured through a combination of worked out strategies, involving among others, indulgences via lower monthly instalments, reduced interest rate and/ or extended tenure of loan repayments.
The restructuring or rescheduling terms are deliberated and recommended by the SDRC after considering thoroughly the affordability of each SME.
It is essential for the SME to continue generating revenue from its ongoing business or has identified income/ funds from other sources (in case business has ceased to operate) as the entrepreneur must be able to service at least part of the financial obligations during the indulgence period.
Generally, the new repayment terms with lower monthly instalments will provide the most needed breathing space to distressed SMEs for them to improve their business cash flow without increasing the SMEs’ debt level. Ultimately, the proposed workout plan is aimed to provide a win-win solution for both the SMEs and financial institutions.
- Documentation Preparation
Visit the AKPK website to discern the documents required. You will have to prepare the necessary documents for your application.
- Online Application
Eligible SMEs may apply for assistance under the SDRS by submitting a completed online application form together with the necessary supporting documents through AKPK website (www.akpk.org.my) .
- Evaluation
The financial institution will be required to evaluate and decide on the application within a specific time frame. If the application is declined by the financial institution, the SME has a second chance for the application to be re-evaluated by an independent committee, known as Small Debt Resolution Committee (SDRC).
If eligible, the SDRC will propose to the financial institution to assist the SME to restructure/ reschedule their problematic financing, or where appropriate, provide a new financing (if strongly justified).
When facing a business downturn, SMEs must put thoughts into how they intend to turn around their business, be transparent and realistic, and be committed to comply with the approved restructuring terms offered by their lenders.Responsibilities of SMEs
- Be Prepared to Make a Change
Whilst the Repayment Assistance/ Restructuring and Rescheduling Assistance is being established by BNM, AKPK and the banks act as an enabling platform to facilitate loan rehabilitation. The SMEs themselves must put thought into how they intend to turn around their business, be transparent and realistic, and be committed to comply with the approved restructuring terms.
- Keep an Open Mind
The path towards better debt management and turning your business around is a long and winding journey and requires consistency, patience and resilience. Remain positive and surround yourself with those who encourage you.
- Be Meticulous with Documentation
The affected SMEs looking into the debt management programme must ensure proper records of the business are properly kept, including audited accounts as these are testaments of the business’ history, achievements and future potential.
It is important for the SMEs to act early and be proactive in seeking early solutions to address their financial problems. This will avoid the business from being wound-up or the entrepreneur being charged with bankruptcy.
There are instances where some SMEs’ applications for repayment assistance were unable to be assisted due to their ineligibility as legal proceedings initiated by the banks against the applicant or business owner has reached to winding-up or bankruptcy stage.
How SDRS effectively assisted in turning around distressed SMEs ?
Since its inception, the SDRS had received more than 1,500 SMEs applications, of which, more than 90 percent applications were approved for restructuring or rescheduling. Some of the applications were rejected mainly due to non-eligibility of the applicants, such as;
- The business has ceased operations and
- Legal action initiated by the financial institutions against the applicant or
- The owner has reached the bankruptcy stage or winding-up.
Meanwhile, about 50 per cent of the SMEs assisted under the scheme were able to improve their business cash flows, turn around their business and continue to remain viable.
What additional services can SDRS offer to SMEs that have financing with multiple lenders?
- SMEs that have financing with multiple banks would often find it difficult to reach a holistic solution to resolve their financing problem as they need to approach each bank individually. In addition, a rejection for repayment assistance by one particular bank may hamper the SMEs’ efforts in meeting its financing obligations with the other banks.
- The Secretariat will normally call for a lenders’ meeting where the SME and banks involved will discuss the position of the SME in a detailed and transparent manner.
- For the SME :
Opportunity to present their case to all banks without having to approach each bank individually (saving time and cost).
- For the banks
Opportunity to seek clarification in coming up with an equitable debt workout solution to the SME and all lenders.
- Hence, the assistance under the SDRS is to ensure a holistic approach to resolving the SMEs’ financial problems efficiently.
- For the SME :
What are the contact details and channels for SMEs to obtain Repayment Assistance from the banks/ SDRS assistance?
SMEs may contact the banks’ Customer Contact Centre or visit the banks’ websites for information on repayment assistance programmes offered including SDRS.
SMEs may also obtain information on SDRS via:
- Website: www.akpk.org.my
- AKPK Call Centre: 03-2616 7766