Bank Negara Malaysia has issued a Circular on the New Definition of Small Medium Enterprises (SMEs) on 6 November 2013.

The Circular on New Definition of SMEs (the Circular) is to inform financial institutions to use the revised definition for SMEs effective 1 January 2014 for statistical purposes, eligibility criteria of SMEs for Government assistance and exclusions.


  • Sales turnover not exceeding RM50 million OR full-time employees not exceeding 200 workers; 

Services and other sectors:

  • Sales turnover not exceeding RM20 million OR full-time employees not exceeding 75 worker

The details by size of operation are as follows:



Sales turnover not exceeding RM300,000 OR full-time employees not exceeding 5 Sales turnover from RM300,000 to less than RM15 million OR full-time employees from 5 to less than 75 Sales turnover from RM15 million to not exceeding RM50 million OR full-time employees from 75 to not exceeding 200
Services & Other Sectors Sales turnover from RM300,000 to less than RM3 million ORfull-time employees from 5 to less than 30 Sales turnover from RM3 million to not exceeding RM20 million OR full-time employees from 30 to not exceeding 75

A business will be deemed as an SME if it meets either one of the two specified criteria, namely sales turnover or full-time employees whichever is lower. The details of the definition are as follows:

Classification of sectors covered

  • Manufacturing – refer to physical or chemical transformation of materials or components into new products.
  • Services – refers to all services including distributive trade; hotels and restaurants; business, professional and ICT services; private education and health; entertainment; financial inter-mediation; and manufacturing-related services such as research and development (R&D), logistics, warehouse, engineering etc; and
  • ‘Others’ refer to the remaining 3 key economic activities, namely Primary Agriculture, Construction, Mining & quarrying. Classification of economic activities for purposes of definition will be based on the Malaysian Standard Industrial Classification (MSIC) 2008 codes. However, the list of activities is not exhaustive and may be subject to amendments from time to time.


Qualifying Criteria

  • Sales turnover refers to total revenue including other incomes.
  • Full-time employees include all paid workers working for at least 6 hours a day and 20 days a month; or at least 120 hours a month. Full time workers also include foreign and contract workers. However, the definition exclude working proprietors, active business partners and unpaid family members of friends who are working in the business and do not receive regular wages.
  • ‘OR’ basis means that a business will need to satisfy either one of the two criteria used in the definition (whichever is lower).
  • If a business can fulfill either one criteria across different sizes of operation, then smaller size will be applicable.  For example, if a firm’s sales turnover falls under micro-enterprise but employment falls under small, the business will be deemed as a micro-enterprise.
  • If a business exceeds threshold set under both criteria for 2 consecutive years (based on its financial year/ accounting period) then it can no longer be deemed as SMEs. Similarly, a business that is previously large can become an SME if it fulfills the qualifying criteria of SMEs for 2 consecutive years.