The Trade Credit Pledge (TCP) is a voluntary pledge. It involves big companies committing to honour payment terms to SMEs within a reasonable time-frame. This will help ensure that SMEs are able to operate without the threat of cash flow problems.
All MNCs, PLCs and GLCs are strongly urged to sign the TCP as part of their CSR initiatives.
The idea for the Trade Credit Pledge came about when a ground-breaking survey conducted by the MALAYSIA SME Media Group and INTI International University and Colleges in 2016 revealed that many SMEs are badly hit by late payments, and that this is a common practice in the Malaysian business culture.
The survey was titled “Challenges and Issues of SMEs on the Credit Terms Given to Malaysian Large Corporations.” The survey found that the decades’ old practice of withholding payments to small firms has caused many SMEs to face cash flow problems. It was found that many SMEs were enduring months without payments, simply because as small businesses, they lack a voice to demand what was owed to them.
The credit problems of these SMEs disrupted their operations and indirectly affected the supply chains of large firms too. Hence, it was felt that a Trade Credit Pledge by large firms can help SMEs directly, while ensuring the sustainability of supply chains to large companies and boosting the entire economy.
Officially launched on 25th Aug 2016 by the Minister in the Prime Minister’s Department Datuk Wee Ka Siong, TCP is spearheaded by a number of organisations. These include MALAYSIA SME, SME Association of Malaysia (SMEAM), Malaysian Air-Conditioning and Refrigeration Association (MACRA), MALAYSIAN Gift and Premium Association (MGPA), Small and Medium Enterprises Association (SAMENTA), Malaysian Entrepreneurs’ Development Association (OUMM), Hong Kong-Malaysia Business Association (HKMBA) & the International Council for SME and Entrepreneurship Malaysia (ICSMEE Malaysia)
The Trade Credit Pledge (TCP) has evolved into a mass movement that encourages and empowers MNCs, PLCs and GLCs to play their part in paying their SMEs suppliers promptly. By doing this the larger firms can assist SMEs relieve themselves of cash flow issues, while continuing to contribute to the supply chain.
We believe that all companies have the capacity to play their part, and our team is here to champion this movement and continue to get more big corporations out there to support us.
Your corporation can be a driver of this movement and play a leading and respected role in assisting the growth of SMEs, while at the same time burnishing your credentials as a responsible corporate citizen.
MNCs, PLCs and GLCs taking part in TCP will be imparting good business ethics by committing to pay the SMEs promptly as part of their CSR programmes. The adoption of the Trade Credit Pledge indicates the commitment of a company to good governance, and its willingness to build a positive reputation in the wider business community. At the same time, it creates long term sustainability for the large firms as it ensures their supply chains via SMEs remain financially healthy, robust and sustainable.
SMEs, on their part, can check out which big corporations have signed the pledge, and if they happen to be their supplier, they are better assured of getting paid within a certain time limit.