The sovereign wealth fund, working in partnership with organisational consultancy firm Korn Ferry, will seek to help local MTCs by offering private credit facilities and capacity building programmes.
KUALA LUMPUR: Khazanah Nasional Bhd has set aside RM1bil under its Dana Impak Fund to assist local mid-tier companies (MTCs) build their capacity, including a possible investment into such companies.
The sovereign wealth fund, working in partnership with organisational consultancy firm Korn Ferry, will seek to help local MTCs by offering private credit facilities and capacity building programmes called Mid Tier Companies Growth Innovation Programmes (MTCGIP) as well as via equity stake investments if needed.
Malaysia Consortium of Mid-Tier Companies general manager Karen Fairclough-Ng said MTCs welcomed the offer of assistance as they are not eligible for many of the incentives offered by the government now which are mainly targeted at small and medium scale enterprises.
“We had consultations with the government on needing assistance for MTCs and MTCGIP is an outcome of that, which is most welcome,” she said at the Malaysia External Trade Development Corp or Matrade’s annual Mid-Tier Companies (MTC) CEO Summit 2024 event here yesterday.
She added there are close to 10,000 MTCs in Malaysia, amounting to about 2% of registered businesses in the country and accounting for 40% of gross domestic product. These companies employ some 16% of total employees in the country.
The MTC classification covers manufacturers with total annual revenues of RM50mil to RM500mil, as well as service companies with annual revenues of RM20mil and above.
Khazanah’s director in investments, Kayse Foo, at the same event, said the private credit initiative is offered as the fund realised there are a group of MTCs that are not getting sufficient bank financing, or are not interested in obtaining equity investment.
“With that, we spoke with various fund managers and were able to find and select fund managers that are interested to invest in private credit and work with MTCs in Malaysia.
“The second initiative is a private equity solution that we have rolled out. There are MTCs that are interested in obtaining equity investments.
“Such companies are more willing and prefer to work with a fund manager, preferably a private equity experienced one, who can drive value creation and help the company grow,” she said.
The third initiative, the MTCGIP, is essentially a capacity enabler programme which is more focused on capacity building. It came shortly after Khazanah launched and announced a partnership with the Securities Commission to increase access to funding and familiarise the capital markets for MTCs to further catalyse their growth and expansion.
Additionally, the wealth fund will work with various agencies and programme panels to roll out the capacity building programme. The eligibility criteria requires MTCs to be profitable and be not owned by government-linked companies or government-linked investment companies, among others.
“Our preferred sectors are in digital, halal, electrical and electronics or E&E, advanced manufacturing and climate resilient sectors.
“We can explore other sectors as well because our programme is focusing mainly on top-line growth,” Foo added.
In order to increase the success of the MTCs, Foo said the fund has chosen the innovation approach of working backwards.
“The working backwards procedure focuses a lot more on customers and before we invest significant resources into building new products and services, the approach recommends that we need to first be very clear on what the customer’s needs are,” she said.
The working backwards approach was started at Amazon and has driven the success of many of the US tech giant’s ventures such as Alexa, Prime and many others.
In addition, Khazanah and Korn Ferry will also link MTCs with potential partners from their global networks such as suppliers, distributors and technology partners.
