(AFP) Prime Minister Dr Mahathir Mohamad today announced a RM500 million ringgit fund to aid Malay businesses pressured by the current economic slowdown.

Of the total, RM380 million has been allocated as loans to provide working capital for Malay entrepreneurs, the premier said in a statement issued to Bernama news agency.

The remaining RM120 million would go towards helping more than 10,000 entrepreneurs facing problems with non-performing loans (NPL), said Mahathir who is acting finance minister.

The premier took over the finance portfolio following the unexplained resignation of Daim Zainuddin on June 1.

Mahathir said the Entrepreneurs Recovery and Development Fund was aimed at curbing rising NPLs and to help small and medium-size industries which have problems securing finance.

The fund would assist "bumiputera" businesses facing NPLs of under a million ringgit by reducing their loans and provide them with working capital.

Under the program, finance institutions would abolish all accumulated interest payments including penalties for unsecured loans.

Loan amounts would be reduced by 40 percent. Participants would receive financial assistance from the fund totalling 30 percent of the total loan and must settle the remaining 30 percent within 18 months.

Efficient management

For secured loans, financial institutions would remove between 50 to 100 percent of accumulated interest payments and penalties, and provide a two year moratorium for loan repayment.

The program would provide fresh loans of not more than RM3 million each as working capital for entrepreneurs.

Participants are required to attend various training programs including finance, management and motivational courses to provide them with skills to compete amid the current slowdown.

Their operations would be monitored to ensure efficient finance management and loan repayment.

To qualify, the statement said the NPL must not be a result of mismanagement or fraud and that only loans classified as non-performing between January 1998 and June this year would be accepted.

The government has revised downwards its economic growth forecast this year to between five and six percent, from seven percent previously, as the global slowdown begins to bite.

In March Mahathir unveiled a RM3 billion supplementary budget to shore up the economy amid the US slowdown. He said the government has to take "preemptive measures" to sustain the growth momentum.