31/05/2023
In 2021, the construction industry in Malaysia had an estimated 3.6 percent share of the country's gross domestic products (GDP). However why are banks not favorable to provide lending to SME businesses related to the construction industry?
According to a journal published by Faculty of Accountancy, Universiti Teknologi MARA, they stated that many small and medium construction companies have no internal control to prevent, detect and respond to fraud incidents. Krishnan and Visvanathan (2007) argues that it is not a surprising fact that the construction sector is the most corrupt sector because of its complex nature of doing business with so many involvements. Certain characteristics of the construction business also makes the construction sector more complicated than some other sectors. These characteristics are a large flow of public money, a very competitive nature of the tender process, lack of transparent selection criteria for projects, political interference, the nature of delivery of monopoly services, tight margins, and close relationships between contractors (Sohail and Cavill 2008; De Jong et al 2009, Rodriguez et al 2005). These specific features and conditions of the construction sector increase the tendency to fraud.
As such, banks are more reluctant to provide clean facilities to the construction industry
Reference:
Journal of Contemporary Social Science Research, Vol. 3, Issue 1, Nov 2019
Statista Research Department, Oct 14, 2022