The Effectiveness of the Implementation of Green Technology Financing Scheme (GTFS) in Malaysia

Abstract

The adoption of green technologies by small and medium scale enterprises (SMEs), which are generally cash strapped but large in numbers, has been seen as an important step for addressing environmental pollution and global warming. The Malaysian government had allocated billions of ringgit for subsidising the adoption of green technologies in Malaysian SMEs, through the Green Technology Financing Scheme (GTFS). Surprisingly, there has been limited uptake of this GTFS scheme, leaving large amounts of unused GTFS based funds. This study, funded by the Malaysian government, examines the reasons for this low uptake. This study finds that information asymmetries, wherein the regulators, bankers and SMEs have different perceptions regarding the objectives of GTFS and the requirements for obtaining GTFS based loans, have led to these low uptake rates. These information asymmetries have led to the submission of incomplete documentations and information sets by the GTFS based loan applicants, which has in turn led to low loan approval rates and low uptakes of the GTFS based loans. This paper details these information asymmetries and develops pertinent recommendations for boosting GTFS based loan uptake rates, which will in turn promote the greening of the technologies used in the SME sector. These findings will also be useful to other emerging economies that are contemplating similar subsidies for promoting green technologies amongst their SMEs.