During the 1997-1998 economic downturn, Dr Mahathir's government took a bold step by asking about 50 banks then to merge into 10 big ones today. Such a system has helped the financial institution to shield themselves from the adverse impact of the global financial crisis.
Since then, the merged entities did well in managing their assets, investments, loans, deposits, etc. None was seen to be shaken.
However, as they got bigger, their taste for profits changed from small to hefty. They are more happy to finance larger companies rather than giving a hand to the needful small and medium-sized businesses.
So much so, the SMIs got weaker, thus leading to some entrepreneurs have to close down their shops, retail outlets of small factories. Those already bludgeoned with debts were declared bankcrupt as no helps came their way.
And today, the situation worsens. Having the world financial crisis around their belts, the banks can no longer be seen as saviour to the SMIs but still, the loan goes to big conglomerates as their capacity to service the interests is considered better than issuing small loans.
This is our banks behaviour nowadays. While the government made several appeals for financial institutions to be more lenient towards small loans, it went unheeded. Some banks even put up more stringent pre-requisities for borrowers.
More than 1600 SMI-related businesses came to a halt since 2005, involving private and government initial capital of about RM4 billion, many of which were in the services, electronics and retail.
What will happen to about 7,000 more in operation should no financial aid is made available to them in enabling the operators to weather the impact of the financial crisis, particularly with declining demand for their products?
The RM7 billion stimulus package announced by the government recently was just a short-term measure. It will reach some sectors of the economy and only a few of the small businesses. Once the money (its origin is unknown) is finished, will there be another one?
The government own or has stakes in respective financial institutions. However, these 'government banks', too are very reluctant to lend money to the needfuls. They are happier investing in some bonds and properties.
The current economic crisis may end later this year or mayber 3 years from now. Its different this time as compared with 1997-1998 as it triggered alarm to financial institutions all over the world.
Not a single economic sector will be spared of its unprecedented impacts. Whether they are big or small industry, the tendency to revive will be at nought if the government fails to emphasis the needs to help out the SMIs.
The bankers should change their attitude, too. Ignoring the significant contribution of the SMIs to the economy will only lead to gradual collapse of the whole economic system as the bigger players would not be able to cope with competitiveness.
Something also needs to be done here.