MICRO businesses and SMEs might still be in the need for supportive policies in order to keep their businesses afloat, according to the latest RAM Business Confidence Survey, as the economy continues to be fragile with uncertain prospects through the next three months.
Conducted between July and August 2020 via online, the survey comprise respondents from 167 firms, with a majority of them being SMEs and micro businesses.
The overall RAM Business Confidence Index (RAM BCI) for the third quarter of the year (3Q20) hit a low of 33.7, reflecting the disruptions that have been plaguing small businesses amid the Covid-19 pandemic.
Almost 90% of the survey’s respondents cited weak economic conditions to be their most significant challenge in the next three months.
This is despite the government’s commendable efforts to assist struggling SMEs and micro businesses to survive the pandemic and during the movement control order (MCO) period.
Such efforts include the loan moratorium, where about 86% of the respondents took up as cashflows remained tight. According to them, without the extension, they might end up facing negative repercussions of either having to scale down or cease operations, or even default on their loans.
Most of the respondents from the survey also appreciated the wage subsidies (68%), loan subsidies (62%) and grants (66%) as aids from the government that kept their businesses afloat.
With that in mind, the BCI survey suggests that the government should apply a more targeted approach (based on firm size and sector) to better assist firms in the near future. For example, an extension for the loan moratorium would be more beneficial to SMEs compared to micro businesses.
“The BCI survey suggest that the extension of the loan moratorium is not useful to bigger SMEs as they may have heftier loan commitments. Up to 85% of larger SMEs need an extension, as opposed to 69% of micro businesses,” stated the report dated Sept 21, 2020.
“However, the impact of not having an extension is more detrimental to the latter. Some 20% of micro businesses stated they would have to shut down their operations, compared to 8% of the SMEs,” it added.
In terms of the type of assistance needed, 79% of medium and 75% small firms indicated the need for wage subsidies to continue, as opposed to 51% of micro businesses, while micro businesses expressed their preference for subsidised loan schemes.
Amid the gloom, a silver lining emerged when the survey revealed the resilience of the firms as they intend to keep their businesses at status quo instead of scaling down through the next three months.
It also indicates that businesses are hopeful for demand to eventually recover in the medium term.
“To this end, we urge policymakers to keep engaging with SMEs and micro businesses. They need to understand the specific requirements of the firms and provide the necessary targeted financial aid to SMEs and micro businesses to tide them over the current crisis,” the report said. – Sept 23, 2020
