A recent suggestion by the National Recovery Council on the need to offer assistance, including bank moratoriums to small- and medium-enterprises (SMEs) has sparked conversations on whether deferments in bank loans alone are enough to help SMEs sustain their businesses.
Recognised as the backbone of the Malaysian economy, data, as of December 2021, indicate that there are more than 1.15 million SMEs nationwide. The sector also contributes more than 38 per cent, or more than RM500 billion, to the country’s gross domestic product (GDP).
Twentytwo13 speaks to SME Association of Malaysia’s national secretary-general, Chin Chee Seong, on how the sector is weathering the storm, and the kind of assistance required for the sector to thrive and reach its fullest potential in the current economic climate.
Would a loan moratorium help SMEs in the country right now?
Chin: Most SMEs were already facing problems following Covid-19, and are trying to recover what they lost in the last two years. Cash flow was the main issue throughout the pandemic. The decision by the government to offer a moratorium at the height of the pandemic in 2020 was helpful. It will be good to have another moratorium right now for affected SMEs. But I don’t think Bank Negara or commercial banks would agree to this. Financial institutions are public listed companies, and they are responsible for their performance. They are not there to help the public facing (cash flow) problems. The government should be the ones taking the lead to help.
How can the government assist?
Chin: A low interest rate loan should be offered to SMEs that need loans. We are not talking about three or four per cent here, more like one or zero per cent interest rate, to cover the minimum management fees. These loans can be guaranteed or subsidised by the government.
Is the government in a position to do this?
Chin: The government has the funds. It boils down to how they want to allocate these funds. I believe the government is looking into this, but it is not something that’s easy.
What about SMEs with cash flow problems? They appear to be facing issues when it comes to getting loan approvals. How do we overcome this?
Chin: Well, this is how banks function. If a business cannot show how they are going to perform, or how it plans to repay the loan, the loans will not be forthcoming. This is why I believe government subsidies are important, and they must take the lead. There are many government banks, including SME Bank and Bank Rakyat, and these banks are capable of giving fast approvals. They should not be overly stringent, too. Surely, if one is currently facing cash flow problems, one would need more time to repay one’s loans. For example, repayment can start six months after obtaining a loan. We should encourage, and not discourage these SMEs.
In your estimation, what is the percentage of SMEs facing cash flow problems right now?
Chin: Around 30 per cent of them are in a critical state. Many have shut down. Look around you and you can see many restaurants have changed names, and many retail outlets have ceased operations. This causes unemployment and will not be good, not just for SMEs, but also for the country. Many SME owners are also eating into their savings.
Besides bank loans, what are some of the other assistance that would benefit SMEs?
Chin: The matching grants for digitisation (the SME Business Digitisation Grant and the Smart Automation Grant by the Malaysia Digital Economy Corporation and the International Trade and Industry Ministry, respectively) should continue. This is important for SMEs, as they are unable to get workers now.
But people often get turned off when it comes to grants, given the tremendous amount of paperwork involved. Shouldn’t it be made easier?
Chin: Yes, you are correct. I often tell the ministries involved that there is no point in offering grants if there are so many roadblocks. It is a turn-off, especially if people are eligible for such grants. A simple auditing process should suffice, rather than making people submit tonnes of documents, but not securing any grants at the end of the day. Make the application process easier.
With Budget 2023 set to be tabled, are there any short-term initiatives that the government should consider that would automatically benefit those in the sector?
Chin: We hope there will be good tax relief (lower tax returns), so they have more cash flow to run their companies. We also hope that the government can help SMEs by providing RM5,000 or RM10,000 in matching grants to help them embark on their digitisation initiatives.
How important is it for the decision-makers to look into the challenges faced by SMEs and to deal with those problems?
Chin: As a whole, most SMEs have recovered, though not fully, following the lifting and relaxation of the Movement Control Orders (MCO). ‘Recovered’ here, means they are able to operate and are able to get business. However, there are some industries within the sector, including tourism, theme park operators, family entertainment centres, tuition centres, and nurseries, that have not been operating well throughout the MCO. As such, the government should offer some form of quick assistance, such as increasing the digitisation grant up to RM20,000.
Given that SMEs contribute close to 40 per cent of the GDP, how crucial is it to help this sector thrive again, in a bid to improve our economy?
Chin: The government must help local SMEs export their products, as it is not easy for us to do so in countries such as China and Indonesia, unlike here. Here, we open our market to others, but we seem to be finding it tough to penetrate new markets. The government should also consider organising exhibitions and events, without SMEs having to pay a fee to take part in, to help them market their services and products. Not many SMEs are prepared to fork out RM9,000 to participate in a three-day event. I hope the government will consider some of these suggestions.
