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CIP 500 Grant (Product Commercialisation)

Understanding the need to grow from prototype stage and the need to fill up the great gap that has existed within the technology sphere for a long while – where hundreds of local technopreneurs have managed to boot-strap or secure pre-seed or pre-commercialisation funding for their technology prototypes but have failed to secure funds to help them commercialise their technology applications or intellectual property – Cradle introduced its CIP 500 grant in October 2009.

The CIP 500 is the first pure technology seed or commercialisation fund offered to help Malaysian start-up companies with technology-based products or services attain commercialisation.

It offers conditional grants of up to a RM500,000 (maximum of two consecutive approvals per company) to local start-up companies with innovative, technology-based products or services to attain commercialisation.

CIP 500 was introduced as a specific measure to bridge the existing seed/commercialisation funding gap (i.e. the lack of seed stage grant, equity and debt funding) in the Malaysian technology funding ecosystem. It provides budding Malaysian companies with the necessary funds, support and skills required to support commercialisation.

With the introduction of CIP 500, Cradle aims to maintain Malaysia’s innovation momentum in the changing landscape of entrepreneurship based on strong commercialisation focus, and create companies that are sizeable, sustainable or venture capitalist (VC)-fundable.

CIP 500 recipients are also given a 12-month period to complete the development of the relevant processes that will enable them to attain commercialisation.

Eligibility criteria

Any start-up company which meets the following criteria:

  • At least 51% of the company’s equity is held by Malaysians, and
  • The company is in operations for less than three years, and
  • The company’s total revenue is not more than RM5 million in its total financial history, and
  • The company owns the Intellectual Property (IP) rights of the product or service which is intended for commercialisation, and
  • The company already has a prototype which only requires another 8% to 10% product refinement work to meet market and industry expectations or demands.

Allowable funding

Categories of funding covered under the CIP 500 are broad so that recipients will be able to get all the help needed to attain commercialisation. These categories include the:

  • Product refinement, market testing and customised packaging
  • Marketing expenses (inclusive of collaterals, travel where necessary, etc)
  • Intellectual Property (IP) search and registration
  • Market research and feasibility studies
  • Pay package of employees
  • Rental and utilities
  • Purchase of hardware and software
  • Business plan refinement
  • Technology licensing or acquisition (if necessary)
  • Product related expenses (if necessary)

Industry Focus
Similar to our pre-seed offering, the CIP 500 funds the following industries:


  • Mobile/wireless tech
  • Creative multimedia & content development
  • Shared services outsourcing
  • Hardware design
  • Software development (Bio-informatics, consumer productivity applications, data mining & business intelligence, electronic design automation, enterprise & business services, gaming & interactive entertainment, Internet & e-Commerce, networking, communications & connectivity, open source, operating systems, security)
  • Internet-based businesses


  • Biotechnology (Bio-informatics, Bio-chemicals, Bio-diagnostics tools, agriculture and food tech)
  • Advanced materials
  • Advanced manufacturing-related tech
  • Renewable energy / waste management / recycling tech
  • High-technology consumer & business products


  • Semi-conductors (manufacturing of integrated circuits, microprocessors, logic devices, chipsets, memory chips)
  • Life sciences (neuroscience, organic chemistry, potential drug target & method of treatment inventions, protein & nucleic acid-based inventions, small molecule chemistry & pharmaceuticals, medical devices, drug delivery systems, molecular biology assays, tools & techniques, analytical chemistry)
  • Clean technology (energy consumption, power management, alternative fuels & materials)


As a CIP 500 recipient, researchers, innovators or students will be provided with more than just commercialisation funding. Recipients will also get value-added services that will help nurture, develop and prepare them to become successful businesses such as:

  • Networking opportunities
  • Further funding and market access support
  • Financial training

Application procedure

To apply for the CIP 500, follow the steps below:

  1. Visit
  2. Register to obtain your login and password
  3. Once logged on, click on the “CIP Application” tab
  4. In the pop-up box, select Product Commercialisation
  5. Fill in the online form
  6. Once all information is complete, click SUBMIT
  7. A notification email will be sent to confirm receipt of application


All CIP 500 applications MUST be submitted online via Email applications are NOT accepted.

If you are unable to complete the form straight away, click SAVE and continue another day when you have all the information at hand.

Only click SUBMIT if you have completed the entire form and is ready to submit your application.
Applications are processed on a first-come-first-serve basis on an on-going basis.

Young Entrepreneur Fund (YEF)

Young Entrepreneur Fund (YEF) is a special fund allocated by the Government as part of its continuous strategy of acculturation and creation of new entrepreneurs among Malaysian youth. The purpose of this fund is to provide alternative access to the young entrepreneurs in obtaining financing to start their new business as well as for the needs of their existing business.

Financing Concept:
Based on Syariah financing concept (e.g. Bai’ Inah, Bai’ Bithaman Ajil, Ijarah, Ijarah Thummal Bai’, Bai’ Istisna’)

Purpose & Margin of Financing

1. Working Capital
for purchases of raw materials, stocks, overhead cost, advertising & promotion etc Up to 100% financing. Reimbursement is allowed for expenses not more than 3 months old at the point of financing approval

2. Purchase of Assets for Business Operations
– Loose tools, machinery & equipment, office equipment etc.
– Brand New – Up to 95%. Refinancing is not allowed.
– Used / Reconditioned – Up to 70%. Reimbursement is allowed for expenses not more than 3 months old at the point of financing approval

Financing limit:
Minimum RM50,000; Maxiimum RM100,000

Up to 7 years including maximum 1 year grace period

Net Profit Rate:
5% per annum (Annuity Monthly Rest)


  • Malaysian youth between 18 to 30 years of age, owning a business
  • The business is registered with Suruhanjaya Syarikat Malaysia (SSM) under a sole-proprietorship or partnership firm, or a Sdn Bhd company
  • For a partnership firm or a Sdn Bhd Company, the youth applicant must hold majority shares of more than 51% AND is the key decision maker
  • Minimum possession of entrepreneurship / vocational certificate
  • Those without entrepreneurship / vocational certificate could be considered through the acquisition of entrepreneurship training from Centre for Entrepreneur Development and Research (CEDAR), SME Bank
  • Start-up companies/firms, defined as in operations less than 1 year, may be considered

Security & Collateral

– Joint & Several Guarantee
– Facility Agreement
– Minimum 10% Cash Collateral ( 1 : 10 )


Malaysia SME backs soft loan idea

Malaysia SME, a media company which caters to local small- and medium-sized enterprises (SMEs), yesterday backed the move by SME Corp Malaysia to give out soft loans, instead of grants, to SMEs.

It, however, suggested that the interest rates be lower. “I think if it (the rates) could be lower than 4 per cent … maybe 2 to 3 per cent, it will help the SMEs a lot.

“Because if you look at the BLR (base lending rate) now, which is about 6 per cent, and if commercial banks give discounts about 1 or 1.5 per cent to the SMEs, it (the rates) would be about 4 or 4.5 per cent,” Malaysia SME’s chief executive officer, Wayne Lim told reporters after a briefing in Kuala Lumpur yesterday on the Second Malaysia SME Congress 2010.

SME Corp, in a recent report, said it had suspended all grants indefinitely as it was restructuring funding facilities to stop abuses in the system.

It plans to offer soft loans through Malaysian Industrial Finance Bhd with a 4 per cent interest rate, saying that way people will be more serious and committed to their businesses.

Wayne said giving soft loans would make SMEs more responsible towards their businesses. “If you give away grants for free, maybe the commitment level is lower … people may take the money but do not really know how to use it. If you lend them the money, they will be more careful.

“Therefore, in my opinion, changing the grant concept to soft loans would work better, provided the interest rate is attractive,” he said.

Currently, about 50 over government agencies provide loans assistance.

On the Second Malaysia SME Congress 2010 themed “It’s All About SME”, to be held on July 7, Lim said it will focus on various aspects of small- and medium-sized businesses.

The event will mainly concentrate on challenges, best practices, business strategies and key success stories and feature prominent speakers. About 500 participants are expected at the event this year. –


Buoyed By Govt Aid, SMEs To Perform Better Next Year, Says MALAYSIA SME CEO

KUALA LUMPUR, Dec 8 (Bernama) — Spurred by the government’s pump-priming initiatives and special incentives, small and medium enterprises (SMEs) are set to perform better next year.

The government’s whopping RM67 billion stimulus packages and financial incentive schemes to jump-start ailing SMEs have helped them recoup losses and get on their feet, says MALAYSIA SME Chief Executive Officer Wayne Lim.

He said there were more prospects for SMEs to grow next year following positive pointers of global economic recovery and with the domestic economy expected to do fairly better than this year.
“The domestic economy is indirectly the backbone of Malaysia’s economy to cushion the stifling impact of the global economic downturn,” he told BERNAMA after delivering a talk on “Opportunities Within Small and Medium Enterprises”.

As a growth engine, Lim said the government had rendered SMEs adequate assistance and incentives to help them tide over with the adverse effects of the global economic crisis.

“The scheme, with 80 per cent loan guaranteed by the government and only 20 per cent risk taken by banks, it makes it much easier to obtain loans. This is a very good move by the government. In fact, the scheme introduced under the RM7 billion first stimulus package was snapped up in six months,” he said.

Lim said SMEs needed government backing to empower them to significantly contribute to the Gross Domestic Product (GDP). “In order for SMEs to make meaningful contribution to GDP, they need to grow like AirAsia (budget airline) and Petronas (national oil corporation). They need to expand from a small-scale enterprise into a large corporation.

“As of 2005, SMEs only contributed a paltry 32 per cent to the GDP which is relatively small as compared to 99 per cent SME businesses in the country. “As such, SMEs need to be innovative to be successful.

They also need to rebrand. With many SME consultants around, it has become easier to rebrand. “Rebranding is important as it gives consumers an emotional attachment to a product,” he said.

On challenges faced by SMEs to tide over with the world economic crisis, Lim said lack of funds was the biggest hurdle. SMEs, which run businesses on a small scale, find it difficult to obtain loans particularly micro-financing. “Some SMEs are not really getting help though many loan schemes and grants are available. They use their personal savings or seek financial aid from their families, relatives and friends to start or develop their business,” he said.

With the establishment of SME Corp, it had made the channel easier to a certain extent to secure loans as all aspects of financial aid are now available under one platform. Asked whether a third stimulus package was needed to help ailing SMEs, Lim said micro-financing was more pressing than a third stimulus package though many SMEs had benefited from the two stimulus packages.

“There are 600,000 SMEs of which 80 per cent are micro-business. Therefore, it will be better to channel more funds to micro-financing, perhaps RM10,000 to RM50,000,” he said.

On the government’s decision not to lift the ban on Bangladeshi workers intake to Malaysia, Lim said SMEs should not be too dependent on foreign labour as it would lead to substantial currency outflow.

“The best option is to do away with foreign workers and increase wages to employ locals. This will be a good formula. By adopting this formula, the government can effectively check outflow of billions of ringgit being sent by foreign workers to their families back home,” he added. — BERNAMA

RM200m loan scheme to spur services sector

Called the Soft Loan Scheme for Services Sector, the fund is managed by Malaysian Industrial Development Finance Bhd (MIDF).

MIDF group managing director Datuk Mohd Najib Abdullah said the loan scheme was in line with the government’s emphasis on the services sector.

“The RM50 million allocation for soft loans under the previous stimulus package has been fully utilised. Given that the impact from the fund has been positive, the government decided to continue providing soft loans for the services sector,” he said in an interview with Business Times recently.

Najib said the RM200 million allocation was a rolling fund. It is for a two-year period.

He said MIDF had been in talks with chambers of commerce and trade associations in the services industry since last year to promote the loan scheme. Najib said MIDF, which was established five decades ago, supported the country’s growth and the restructuring of the country’s economy.

“So far, there has been three phases of growth in the economy of our nation which is tied to MIDF’s role,” he said.

Initially, MIDF’s role was to provide loans to the industrial sector to generate employment to the people of the newly independent nation. Then, it went on to support import-substitution industries that the government undertook for the country’s economy and later, the focus was on export-oriented sector.

“Now, the government is emphasising on the services sector,” he said.

Through the Economic Transformation Programme, the government aspires to shift the economy towards a service-based economy and transform the country into a developed nation by 2020. By then, the services sector is expected to expand from 58 per cent of the gross domestic product currently, to 65 per cent.

MIDF, a wholly-owned subsidiary of Permodalan Nasional Bhd, is the country’s first development financial institution. It was incorporated on March 30 1960.

by SME Corp

New SME loan scheme gets mixed feedback

Observers say CGC’s Enhancer Express loan facility can be improved.

A NEW financing scheme for small and medium enterprises (SMEs) has drawn mixed reactions. While observers recognise that the scheme is a good initiative, they say there is room for improvement.

Koong … ‘CGC should top up the RM100mil financing amount to benefit more SMEs.’
Credit Guarantee Corp Malaysia Bhd (CGC) has allocated RM100mil of financing for SMEs under a newly-launched credit guarantee scheme called Enhancer Express. The scheme is aimed at promoting the growth and development of SMEs, particularly those in the wholesale and retail sectors, and is available at financial institutions throughout the country for a limited period of three months or until loan approvals hit RM100mil, whichever comes first.

It said: “Enhancer Express offers loan ranging from RM50,000 to RM100,000. The loans are offered to small businesses that have been in operation for more than three years.”

Under the scheme, borrowers will enjoy a fixed guarantee fee of 4.5% per annum, which is relatively lower compared with a maximum fee of 5.75% for other CGC schemes. The guarantee fees are calculated based on the borrowers’ individual risk profiles.

According to CGC, the lending rate for Enhancer Express will depend on the financial institutions, but the maximum rate would be BLR (base lending rate) plus 1.75%, on top of the fixed guarantee fee of 4.5% per annum. The guarantee cover for the scheme is at 70% by CGC.

CGC managing director Datuk Wan Azhar Wan Ahmad says: “The Enhancer Express was designed specifically to expand our SME outreach by improving on our turnaround time for loan processing and approvals. To achieve that, we have simplified the documents required by both the financial institutions and CGC.“By aligning with the industry practice, we expect to further improve on our processing and approval time, which will translate into speedier disbursement of funds to the borrowers.”

He further emphasises that the introduction of Enhancer Express is in line with the Government’s initiative to support small businesses towards financial inclusion within the economy, thus enabling this critical segment to develop in tandem with other business segments of the economy.

“With attractive features that are beneficial to the financial institutions as well, we are also looking forward to their greater participation in the Enhancer Express scheme to further promote the development of the small business community,” he adds.

CGC, a subsidiary of Bank Negara, provides credit enhancement services to SMEs with inadequate collateral or without collateral and which has no track record. It has cumulatively guaranteed about RM47bil to more than 400,000 SMEs in the country.

Associated Chinese Chambers of Commerce and Industry Malaysia SMEs deputy chairman Koong Lin Loong says it is a good scheme that SMEs can consider applying for. However, the response will be based on the lending rates because the SMEs’ margins are very tiny.

To him, a guarantee cover of between 70% and 80% is reasonable for the scheme. He adds that the tenure of the loan is also important and a payment period of between five to seven years is still manageable for SMEs.

“CGC should top up the RM100mil financing amount to benefit more SMEs, and the loan should be opened for all sectors and not just limited to wholesale and retail sectors. Other sectors, such as manufacturing, construction and services, are also contributing to gross domestic product significantly,” he argues.

Koong says if the qualified SMEs are entitled for a minimum loan of RM50,000, the RM100mil can only benefit 2,000 SMEs. Thus, he reckons that the total loan amount should be increased. However, he acknowledges that Enhancher Express is a good initiative.

Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee says CGC’s new financing scheme is not that exciting as the net rate to be borne by the SME will still be high. “Taking into consideration the base lending rate at 6.3% plus 1.5% to 2% lending rate, and the additional CGC fixed fees of 4.5%, the overall cost of borrowing under Enhancer Express is expected to be in region of 12.3% to 12.8%.

“Any borrowing cost above 12% will be burdensome under the current business environment. Retailers now face rises in the cost of goods, and are facing constraints in passing the cost increase to consumers due to price controls and competition from hypermarkets,” he says. He adds although the fixed rate of 4.5% appear to be reduced from the maximum rate that can be charged of 5.75%, it will not benefit those SME borrowers who are good paymasters. As such, Chua contends that those SME borrowers who settle loan promptly should be given rebates to reduce the guarantee fees to between 2.5% and 3%. According to him, prior to the hike in guarantee fee rates by CGC to a maximum 5.75% in mid 2010, the maximum rate was only 3.5%. Chua says the the RM100mil allocated under this scheme is modest and is expected to benefit only 1,000 to 2,000 SMEs in the wholesale and retail sector. Nevertheless, it will be helpful as SMEs in this sector account for almost 45% of the total SMEs in the country.

He thinks that the requirement for a minimum three-year track record should be reviewed because the newer SMEs are the ones requiring help from CGC as banks are reluctant to lend to them. “CGC should play a more active nation-building role, for which it was originally set up for, by helping SMEs who lack collateral,” he says.

Reducing the CGC approval time with simplified forms is welcome, he adds. However, the association proposes further simplification of the application process by using a single form for submission to the bank and CGC as against having to fill two different forms and going through two different approving authorities.

“Merging the application process with a single approval authority will save time. Also a common standardised loan application form with a single application window will ease further the application process,” he says.

News Source :

Government Funds / Financing Schemes

According to BNM Annual Report 2006, there were 94 Government funds/financing schemes for SMEs with a total allocation of RM25 billion, as at end-2006. Five of these special funds were established by Bank Negara Malaysia with a total allocation of RM11.4 billion.


SME Bank or Bank Perusahaan Kecil & Sederhana Malaysia Berhad is the result of a merger between Bank Industri & Teknologi Malaysia Bhd and Bank Pembangunan & Infrastruktur Malaysia Bhd (BPIMB). The Bank started its new function on 3 October 2005 as a DFI to nurture and meet the unique needs of small and medium enterprises (SMEs). As a one-stop financial centre responding to the funding and business growth needs of Malaysian SMEs, the Bank complements existing products and services offered by commercial banks through a comprehensive and integrated financial and business advisory services. Its primary role is to contribute towards the growth of a more robust entrepreneurial community in Malaysia. A wholly-owned subsidiary of Bank Pembangunan Malaysia Berhad, the Bank operates through its head office in Kuala Lumpur and 16 branches nationwide

SME Bank is focused on providing financing for micro businesses, small businesses and medium-sized businesses. The Bank offers five loan schemes specially designed to help different type of small and medium-sized enterprises flourish in the years ahead, namely SME Professional, SME Start-up, SME Procurement, SME Franchise and SME Global.

SME Bank’s role is to complement the role of existing financial providers of SME loans. The bank focuses on businesses with potential to grow but seen as relatively unviable by the commercial banks to deserve financial assistance. The SME Bank aims to become a one-stop centre for all SMEs with annual revenues up to RM25 million in the manufacturing sector and up to RM5 million in the services sector.

In addition to providing financial assistance, SME Bank also offers comprehensive end-to-end advisory support to help nurture SMEs from start-ups or small businesses until they expand to become large corporations. The advisory services include business assessments, business matching, business dialogues/conferences and research and knowledge linkages.

For more information, please contact:

SME Bank
Menara SME Bank
Jalan Sultan Ismail
P.O. Box 12352
50774 Kuala Lumpur
Tel: 603-2615 2020 / 603-2615 2828
Fax: 603-2692 8520 / 603-2698 1748


Malaysian Industrial Development Finance Berhad (MIDF) was incorporated in 1960 with the role of promoting the development of SMIs in Malaysia by providing medium to long term financing facilities. MIDF’s financing facilities are mainly extended to new industrial ventures as well as existing enterprises that are undertaking expansion, modernization, diversification and/or relocation programmes in manufacturing-related services, infrastructure, utilities, tourism and other service sectors.

One of the many funds offered by MIDF is the Fund for Cross Border Investments. This Fund was introduced in June 2004 with an initial allocation of RM50 million to assist Malaysian companies, especially those in the labour intensive manufacturing sectors to undertake new investments within the ASEAN region.

MIDF is one of the DFIs designated by the government to manage and disburse funds under various special loan schemes. The special loan schemes tailored for SMEs include:

Soft Loan Scheme for Small and Medium Enterprises (SLSME)
Soft Loan Scheme for Factory Relocation (SLFR)
Soft Loan Scheme for ICT Adoption (SLICT)

For more information, please contact:

Malaysian Industrial Development Finance Berhad (MIDF)
Menara MIDF
82, Jalan Raja Chulan
50200 Kuala Lumpur
Tel: 603-2173 8888
Fax: 603-2173 8877


Credit Guarantee Corporation (CGC) was established in 1972 with its majority shareholding of 79.3% held by Bank Negara Malaysia and the remaining shareholding of 20.7% held by all commercial banks and finance companies operating throughout Malaysia. CGC aims to assist SMEs with no or inadequate collateral to gain access to credit facilities from financial institutions by providing them with guarantee cover on such facilities. CGC formulates and manages credit guarantee schemes and collaborates with its partners i.e. commercial banks and finance companies in assisting SMEs financially. CGC operates through representations in more than 2,600 of its partners’ branches located throughout Malaysia.

In line with the government’s effort to develop businesses in priority sectors, CGC has adopted the role of a DFI to financially assist SMIs which form the base for industrial development. CGC also works closely with Bank Negara Malaysia and the Ministry of Entrepreneur and Cooperative Development in performing its functions.

CGC offers the SMEs the Flexible Guarantee Scheme (FGS) which provides guarantee for government-aided loans such as the Fund for Small and Medium Industries 2 (FSMI 2), New Entrepreneur Fund 2 (NEF 2) and Rehabilitation Fund for Small Businesses (RFSB). The funds are designed to allow SMEs with viable projects or businesses have easier access to credit facilities. Loan applications are to be made at participating financial institutions.

The main characteristics of the FGS will include a guarantee cover ranging from 30% to 80% as this is a requirement by participating financial institutions. An annual guarantee fee is imposed and this is calculated based on the guarantee cover issued. The fee is required to be paid in advance but the fees are usually borne by the participating financial institution. Interest rates chargeable by CGC are ranging from 0.8% to 2.15% per annum for the unsecured portion of the loan whereas for the secured portion of the loan, interest rates range from 0.5% to 1.85% per annum.

Other guarantee schemes include Direct Access Guarantee Scheme (DAGS), Direct Access Guarantee Scheme Start Up (DAGS Start-up), Direct Bank Guarantee Scheme (DIRECT BG), Small Entrepreneur Guarantee Scheme (SEGS), Islamic Banking Guarantee Scheme (IBGS), Franchise Financing Scheme (FFS), Direct Access Guarantee Scheme Islamic (DAGS-i) and Credit ENHANCER Scheme (ENHANCER).

From the financing facilities identified, SMEs will have the option of approaching commercial banks or financial intermediaries such as DFIs in evaluating the types of financial assistance required. In enabling SMEs to reach out to various lenders, financial intermediaries are actually helping banks to reach out to a larger customer base. This will in turn enable banks to play a supporting role in promoting priority sectors through increased transactions with SMEs.

For more information, please contact:

Credit Guarantee Corporation Malaysia Berhad (CGC)
Level 13, Bangunan CGC
Kelana Business Centre
97, Jalan SS7/2
47301 Petaling Jaya
Selangor, Malaysia
Tel: 603-7806 2300
Fax: 603-78063308
by SMI Business Directory

Islamic Finance For Businesses

Do you qualify for Islamic finance?

You don’t have to be Muslim to be eligible for Islamic finance. Cia Manes, an attorney at law firm Howard Kennedy, looks at how businesses could benefit from a growing pot of money.

When considering sources of business funding, applying for Islamic finance may not be the first option that springs to mind. But with Islamic investment vehicles sitting on billions of dollars, mainly from oil and gas returns, it’s an option that businesses would do well to think about. I’ve tried to answer some of the most common questions below.

Do I qualify for Islamic finance?

The idea that you have to be a Muslim to qualify for Islamic finance is completely false. However, your business must undertake an activity that is Shariah-compliant. Businesses promoting gambling, tobacco, alcohol, pork products, pornography, arms and other companies that produce products that may be viewed as harmful to humanity or the environment would be refused.

What kind of businesses are eligible?

Islamic banking dictates that business should provide some form of benefit to the community at large, rather than setting pure profit as the aim. Examples of small to medium-sized enterprises (SMEs) that could benefit from Islamic capital would be: an interior design company that offers decorating services to lower-income homes, a provider of mobile medical facilities, small enterprises selling forest carbon credits, or a dress shop in a rural area.

Are there any special advantages to Islamic finance?

When you get a loan from a conventional bank and things go wrong, the lender’s main priority is to recover its money, even if that means leaving the entrepreneur high and dry. Islamic banks, on the other hand, have the obligation to share in both the risks and the rewards when offering long-term financing to businesses. Simply accepting interest on a loan is classed as usury (riba) and is against Islamic law.

What does that mean in practice?

The most used instruments of Islamic commercial financing are profit and loss sharing schemes (musharaka). It’s a partnership where the profits are distributed in pre-arranged proportions and any losses are shared in proportion to each partners’ capital or investment. Another arrangement is ijara, which permits the financial institution to earn a profit by charging leasing rentals instead of lending money and earning interest. Another is purchase-and-resale (murabaha) where the capital provider purchases the required asset or product for which a loan would otherwise have been taken out from a third party. The asset is later resold at a higher price to the capital user.

What are the drawbacks?

With some financial aspects of Shariah law open to interpretation, some instruments may be offered by some institutions, but not by others. Some non-Muslim clients could also find that the conditions imposed by Islamic banks prevent them from taking advantage of shorter-term opportunities. Speculation or involvement in shorter-term market trends is outlawed, which gives the Islamic banking sector greater stability, but slows the pace of product innovation.

Why don’t more non-Muslim entrepreneurs use Islamic finance already?

I believe the main barrier is psychological. It is not easy to accept a new system when you think that the existing one is unique and perfect. However, if a business or project meets Shariah requirements, I see no reason why any SME should not request funding from an Islamic bank or financial institution.

by GrowthBusiness

Managing Your Credit Score

On the road to taking care of one New Year’s resolution – getting my financial situation in order – I am happy to report I have improved my FICO credit score in one week by finally accepting that my savings account is actually costing me money (as the interest doesn’t offset my credit card APRs), and consequently committed to putting more into my credit card payments instead of savings until at least three cards are paid off.

Making Payments

Pay your bills on time.
Your payment history is the largest contributor to your FICO® score. Consistently make all of your payments on time. If you cannot pay down the full balance on an account, then pay down at least the minimum amount due. If you are forgetful about paying bills, sign upwith an automatic bill pay service.
If you can, pay off more than the minimum on credit cards.

The larger the cushion between the balance on your credit card and its credit limit, the more it will help your FICO® score.

Do not miss payments on an account for very long.

If you miss payments on an account for many months or longer, then the account can go into late status, be charged off, sent to a collection agency, or even result in a court judgment. This can cause your

FICO® score to drop dramatically.

If you have missed payments, get current and stay current.

In general, the longer you pay your bills on time, the better your score. If the payments on your accounts are past due, get caught up as soon as possible.

Pay off collections, judgments, or tax liens.

Unpaid collections, unsatisfied judgments, and unreleased tax liens are all evidence that you have not paid your debts in the past. Paying off the debts that resulted in a collection, judgment, or tax lien won’t remove it from your credit report, but it will reduce the damage it causes to your score. But be aware that paying off a collection, judgment, or tax lien will make it recently active, which could cause your score to drop in the short term.

If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
Try to work out a payment arrangement with your creditors and negotiate with them to keep at least a portion of the late notations off of your credit reports. If your situation is serious, see a legitimate, non-profit credit counselor. Avoid the scam artists who promise a quick reversal of your credit problems.

Working with your creditors won’t change your score immediately, but managing your credit and making payments on time will help your score over time.

Managing Balances

Keep balances low on credit cards and other “revolving credit”.

In general, keeping low balances on credit cards is better for your FICO® score. “Maxing out” your credit cards, that is, keeping high balances that are close to the credit limit, is a sign to lenders that you are overextending yourself and dependent on credit to maintain, or artificially enhance, your style of living. It can be regarded as an indication that you are not in control of your spending habits because you consume up to the maximum that your credit will allow.

Pay off debt rather than moving it around.

Paying off your current debts and maintaining low balances demonstrates good credit management.

Consolidating or moving your debt from one account to another usually will not help your FICO® score since the same total amount is owed. In fact, opening new accounts may hurt your score.

Establishing Credit

Establish credit early.

In general, a longer credit history is better for your FICO® score.

Get a secured card.
A secured card is a card for which you forward money to the issuer when you open the account, and in return, the issuer will give you a credit line no larger than the amount you deposited. A secured card allows you to open a credit account that establishes your credit history, even when you are turned down for credit cards because of a bad credit history or no credit history. Before acquiring the secured card, make sure that the issuer will report your payment history to the credit bureau, just like any other credit card would. Also make sure that the card won’t be reported to the credit bureau as “secured” by the credit issuer.

Get a merchant card.
Apply for cards from retail stores or gasoline companies because department store and gas cards are usually easier to qualify for. Making reasonable monthly charges and making consistent monthly payments will enable you to establish credit.

Applying for New Credit

Avoid opening too many new accounts at once

This is a sign to lenders that you could be in desperate financial condition and must apply for as much credit as you can get. This can lower your FICO® score. Avoid opening too many accounts in a short period of time especially if your credit history is less than three years old; this is a red flag to lenders that you will be a risky customer. Only apply for credit that you need when you need it.

Avoid applying for too many accounts over several months

When you apply for credit, whether you qualify for the account or not, this is noted on your credit report as an inquiry. Too many inquiries are a sign to lenders that you are desperate for new credit and are attempting to acquire multiple lines of credit at the same time.

Do all rate shopping for new auto and home loans within a few weeks.

Shopping for the best interest rate on a new home or auto loan is smart. For this reason, your FICO® score attempts to distinguish between some searching for the best rate on an auto or home loan and someone who is opening multiple loans or credit accounts at the same time. Rate shopping for auto or home loans is treated as a single inquiry if done within a short timeframe. So, if you’re shopping for the best rate for your next home or car, do so in a matter of days instead of over a few months.

Don’t open new credit cards that you don’t need.

Unless you are establishing a credit history, don’t apply for credit cards you don’t need just to increase your available credit. This approach could backfire and actually lower your score.

Be neat and consistent when filling out credit applications.
This will ensure that all your good deeds get recorded in a single file as opposed to multiple files or, worse, someone else’s file. Watch out for inconsistencies in the use of “Jr.” and “Sr.”

Closing Credit Cards

Don’t close unused credit cards as a short-term strategy to help your score.

Closing old or unused credit cards rarely helps your FICO® score. By closing unused credit cards, you wipe away some of your available credit which causes your balance-to-available-credit ratio to decrease.

Keep some credit accounts – but manage them responsibly.

In general, keeping a couple of credit cards or installment loans open, and making timely payments, should help your score. Someone with no credit cards and no credit history is seen by lenders as more risky than someone who has managed credit cards responsibly.

Closing an account doesn’t make it go away.

A closed account will still show up on your credit report for as long as seven years. It is not a strategy for removing evidence of late payments or past due amounts from your credit report.

Keep Your Credit Report Accurate

Examine your credit report for errors

The Score Power reports provided with your Score Watch subscription are perfect for determining whether your credit report contains errors. Look closely at all the data on your report to see that it all matches up. Make sure that your name, Social Security number, and addresses are correct and current.

Look for accounts, inquiries, collections, or public records that are not yours. Incorrect information may be costing you the FICO® score you deserve.

If you find errors on your credit report, dispute them.

Contact your creditors or send letters of dispute to the credit bureaus to have any errors on your credit report corrected. The credit bureaus have 30 days to investigate your claim and make any appropriate corrections.

Keep tabs on your FICO® score and credit reports

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