"I think if it could be lower than four per cent, maybe two to three per cent, it's even better as this rate will help the SMEs alot.

"Because if you look at the BLR (base lending rate) now, which is about six per cent and if commercial banks give come discount offer to the SMEs about one per cent or 1.5 per cent, it comes back to about four or 4.5 per cent," Malaysia SME's Chief Executive Officer, Wayne Lim said.

There is no point in charging too high as there would be no difference then, he told reporters after a briefing here today on the 2nd Malaysia SME Congress 2010.

SME Corp in a recent report said that 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 the Malaysian Industrial Finance Bhd with four per cent interest rate, saying people will be more serious and committed.

Wayne said the move by SME Corp would enable SMEs to be more responsible if it was a soft loan rather than a grant.

"If you give away grants for free maybe the commitment level is lower, people might take the money and suddenly do not know how to use it. If you lend money, you have to be be careful.

"Therefore, in my opinion changing the grant concept to soft loans works better, provided the interest rate is attractive," he said.

Currently about 50 over government agencies provide loans assistance.

Meanwhile, on the 2nd Malaysia SME Congress 2010, themed "It's All About SME", that will be held on July 7, he said it will focus on the varied aspects of the small and medium sized businesses.

The congress will mainly concentrate on challenges, best practices, business strategies and key success stories. It will also feature prominent speakers.

Malaysia SME is targetting about 500 participants this year. - BERNAMA