SMALL and medium enterprises (SMEs) would require loan restructuring if they were to benefit from the RM12 bil set aside by the government as part of its Covid-19 relief, said SME Association president Michael Kang.
“Banks have their own guidelines, and only those with class A credit rating can get loans offered by the government, while others find it much harder. Those with weaker credit ratings tend to be the businesses that need the help more.
“However, commercial banks have to follow Bank Negara’s guidelines on offering loans, so they will not take the risk. Banks also have to be accountable to their shareholders,” said Kang to FocusM.
He added that, following the credit rating requirement, the government’s Penjana fund for SMEs goes to a fraction of businesses, which number around 200,000.
“What about the rest of the SMEs? With more than 800,000 of them, they offer a majority of employment. Helping them to stay afloat by offering the loans will help reduce unemployment.”
As such, he believes that government measures to-date have not provided enough assistance to SMEs, especially in the loans segment.
He added that there were some businesses still being unable to secure bank loans in June.
“We hope the government can put in more funds to help SMEs stay afloat.”
When asked about what it would take for banks to take risks to offer loans to those with lower credit ratings, Kang said the only risk is if every SME cannot repay the loans.
“Yes, if a bank’s non-performing loans (NPL) shoots up, they will be accountable to Bank Negara and their shareholders.
“This means that they have to communicate with those they are accountable to, as well as the SMEs themselves to reduce the risk of those loans turning into NPLs.
“Even if it is only temporary, a restructuring of loans and credit rating system will help businesses to survive the economic effects of Covid-19,” said Kang.
As it stands, he believes that unless the government steps in to aid in making the loans accessible to more SMEs, a large number of businesses will not recover by September, which could push the rate of unemployment higher moving forward.
“By September, we should see a majority of businesses in recovery, and when the moratorium ends, 60% to 70% of SMEs will face difficulty in repaying loans, and staff layoffs are likely.
“For some companies, it is like a reset, and they have to rebuild their businesses, and this will take at least six months.”
At the same time, Kang also believes that June unemployment figures may see up to one million unemployed Malaysians, compared to the 800,000 Human Resources Minister M. Saravanan had noted for May.
This, Kang said, points to SMEs having trouble getting loans.
As an example, he said, much of the tourism industry relies on loans for recovery.
“While domestic tourism is helping, it is not enough. Some places are looking at only 40% revenue and this is not enough to cover overheads.
“This is further exacerbated by rentals coming back to full rates, adding to the burden of businesses,” said Kang.
He added that the SME Association has been advocating to buy Malaysian products to aid in recovery, but things are slow-going. – July 22, 2020
