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Subsidized Investment Loans/Funds

Challenges to investment 

In 2010, the Malaysian government launched the Green Technology Financing Scheme (GTFS) to promote green technology investment by offering lower financing costs and greater access to finance. By 2017, over USD 770 million (MYR 3.7 billion) in financing for 319 applications had been approved under the scheme, meeting target financing levels. However, financial institutions remained cautious about funding green technology projects because of perceived risk, where banks would not accept renewable technology as collateral or finance industries other than energy and utilities which had government-guaranteed revenue streams. As a result, applications were difficult to get approved, concentrated (over 85% in energy and utilities), and unable to catalyse sufficient private sector investment to meet Malaysia’s environmental targets. 

 

Approach 

In 2019, the Malaysian government launched GTFS 2.0, extending the 2010 GTFS and earmarking an additional USD 460 million (RM 2 billion) for green technology financing. The program offered a 2% annual interest/profit rate rebate for the first seven years of financing on qualifying projects, along with a 60% government guarantee on Green Technology Costs to reduce risk for lenders. The government added additional sectors in scope, including manufacturing and Energy Service Companies (ESCOs), and project types, especially to finance investments in energy efficiency and energy performance contracting.  


Key Enabling Conditions 

The program's success hinged on several key factors. The government guarantee substantially mitigated risk for lenders, thus encouraging broader participation in green technology financing. As a continuation of the successful GTFS scheme, GTFS 2.0 demonstrated the government's ongoing commitment to sustainable development. The program's eligibility across sectors like energy, water, building, transport, and manufacturing spurred diverse innovation and adoption of environmentally friendly solutions.

More recently, in 2023, the National Energy Transition Roadmap (NETR) further increased the ambition of Malaysia in regards to gradually increasing RE shares to, respectively, 31% by 2025, 40% by 2035, and an impressive 70% by 2050. This has acted as yet an additional positive signal and confidence booster for investors in the clean energy space.  

 

Impact / Outcomes

GTFS 2.0 proved successful in mobilizing green technology investment. Since the inception of the program, it approved 112 projects that received RM 1.92 billion (USD 445 million) in financing commitments from 28 participating institutions. This initial funding leveraged an additional RM 2.4 billion (USD 550 million) in green investments. The supported projects contributed to an estimated annual greenhouse gas reduction of 1.32 million tonnes of CO2 and led to the creation of approximately 491 new jobs. Approved applications under GTFS 2.0 were still concentrated, with only one approved application outside energy and utilities and with three states – Perak, Johor, Selangor – accounting for over 60% of approved applications. However, GTFS 2.0 achieved its financing target much faster than the original scheme. Additionally, the majority of funded projects received between RM 500,000 and RM 25 million (USD 115,000 to USD 5.8 million) in financing, raising the average investment per project by 40-50%.


Additional Sources

Locations
ASEAN, Malaysia
Year published
01 January 2019
Policy type
Energy policy
Risk category
Financial sector risk, Currency/macroeconomic risk, Policy and regulatory risk
Policy lever
Incentives for clean energy

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