Overview

Original Research

UNVEILING FACTORS IN NON-PERFORMING LOANS: EXPLORING THE RURAL ECONOMIC FINANCING SCHEME

SITI AZWAH MOHD ZUBIR 1, NORIHA KASIM 2, MAZLAN MOHD DALY 3, NURHIDAYATEE RUSLI 4, and FATIMAH BIBI HAMZAH 5.

Vol 18, No 11 ( 2023 )   |  DOI: 10.5281/zenodo.10159238   |   Author Affiliation: Kementerian Kemajuan Desa dan Wilayah (KKDW), Persiaran Perdana, Presint 4, Pusat Pentadbiran Kerajaan Persekutuan, 62100 Wilayah Persekutuan Putrajaya, Malaysia 1; Majlis Amanah Rakyat (MARA), Jalan MARA, 50609 Kuala Lumpur, Malaysia 2; Jabatan Kemajuan Orang Asli (JAKOA), Bangunan Saujana PjH, Presint 2, Pusat Pentadbiran Kerajaan Persekutuan, 62100 Wilayah Persekutuan Putrajaya, Malaysia 3; Lembaga Penyatuan dan Pemulihan Tanah (FELCRA), Wisma FELCRA, Jalan Rejang, Setapak Jaya, 50772 Kuala Lumpur, Malaysia 4; Universiti Poly-Tech Malaysia, Jalan 6/91, Taman Shamelin Perkasa, 56100 Kuala Lumpur, Malaysia 5.   |   Licensing: CC 4.0   |   Pg no: 95-104   |   Published on: 14-11-2023

Abstract

The Rural Economic Financing Scheme (SPED) programme, initiated by the Ministry of Rural and Regional Development (KKDW), aims to enhance rural areas' development, and uplift the socio-economic status of rural communities. Despite being implemented for two decades since 2001, no comprehensive studies have examined the impact of SPED on entrepreneurs, particularly regarding the implications of financing on their businesses. This study focuses on the issue of Non-Performing Loans (NPL) among SPED borrowers, aiming to identify the contributing factors to NPL problems. To achieve the study's objective, a mixed-methods research design was employed, incorporating quantitative and qualitative approaches. The findings indicate that entrepreneurs experiencing NPL issues often face challenges stemming from their limited knowledge, skills, and inadequate financial management capabilities, such as insufficient understanding of loan terms, ineffective financial planning, and suboptimal debt management. This study's outcomes contribute to a better understanding of the implications of SPED financing on entrepreneurs in rural areas and shed light on the factors influencing NPL among SPED borrowers, suggesting the need for targeted interventions and support mechanisms, such as training programs and mentorship opportunities, to enhance the financial management skills of SPED borrowers and mitigate NPL risks.

Keywords

Rural Development, Non-Performing Loan, Rural Entrepreneur, Bumiputras, Financial Management.