Don’t rely on short-term ROI when financing IT, logistics sectors, banks told

Micci vice-president Azman Shah Yusof said if banks are not engaging directly with businesses on the ground but relying purely on numbers to justify their lending decisions, they will be off the mark. (File pic)KUALA LUMPUR: Banks should not use short-term return on investment (ROI) as the sole yardstick when considering loans for the IT and logistics sectors, the Malaysian International Chamber of Commerce and Industry (Micci) said today, noting that some investments take longer to yield returns.Micci vice-president Azman Shah Yusof said these sectors – while crucial for global competitiveness – remained underfunded as financial institutions focused excessively on numbers and KPIs rather than properly understanding how businesses operate.He said banks should understand "that they are financing an entire sector, not just an individual borrower", and that there is a broader multiplier effect."The underlying success factor for the manufacturing and logistics sector is operational efficiency."With operational efficiency comes competitive advantage," he said at the annual Sasana Symposium, hosted by Bank Negara Malaysia.Azman said if banks were not engaging directly with businesses on the ground but relying purely on numbers to justify their lending decisions, they would be off the mark.CelcomDigi chairman Azmil Zahruddin agreed, saying banks should broaden the way they assess risk instead of relying mainly on collateral and credit history."A lot of start-ups and new businesses don't have either," he said.Azmil added that when businesses such as tech start-ups are experimenting and innovating, a high failure rate is inevitable.However, he said larger banks should be more willing to take risks, as they are better positioned to extend financing because of their greater capacity to absorb losses.