Offer loans to SME with lower or zero rates amid Covid-19, think tank urges govt
KUALA LUMPUR, April 1 — Political research outfit Political Studies for Change (KPRU) has urged the government to offer small and medium enterprises (SME) more accessible loan with lower or zero interest rates as added measures to cushion the economic impact of Covid-19.
Based on their report on the recently announced people-centric stimulus package by the government, the research centre stated there were not enough benefits for SMEs to withstand economic headwinds caused by the outbreak and the subsequent movement control order (MCO) that was imposed nationwide.
KPRU recommended that the government should provide more attractive or zero interest credit facilities to SMEs and expand Bank Simpanan Nasional’s (BSN) allocation of RM700 million to RM1 billion that is meant for loans micro to-entrepreneurs.
“We recommend that the government and the relevant parties offer lending facilities or guarantees to SMEs at lower interest rates, or preferably zero interest rates for a period of time as a measure to face the current crisis.
“In addition, BSN’s Micro Credit Scheme fund could be increased from RM700 million to RM1 billion to benefit more SME entrepreneurs,’’ said the report.
KPRU said Malaysia should emulate the UK where its government has offered £30 billion (RM161 billion) in loans to SME with a maximum of £5 million per firm, with a turnover of not more than £45 million per annum, at zero interest rates for 12 month.
The move said the report would certaintly reduce the cost for SMEs and drive further investment in their business including more hiring of personnel.
Other than better credit facilities, KPRU also suggest for the government to look into the accessibility of loans to SME as many parties are not incline to extend a credit line or loans to them, especially those who are self employed.
KPRU quoted a report by the central bank in 2017 that states as many as 23 per cent of SME applications for loans or financing facilities are rejected while Ministry of Finance Economic Outlook 2020 and the Department of Statistics’ Enterprise Survey 2015 shows that more than 70 per cent of SME uses their personal funds as mean to operate their businesses.
“The growth and progression of SMEs is largely dependent on the ability to obtain financing for operations and business development purposes. As such, the cash flow of SMEs is already at high risk even before the Covid-19 outbreak.
“If more than 70 per cent of SME entrepreneurs operate on personal sources of financing, then they are the most vulnerable group to bankruptcy due to cash shortages and lack of government assistance or bank lending facilities.
“Lending constraints through the financing schemes provided by agencies cause SMEs to focus on commercial banking institutions and are unaware of the alternative loan schemes provided,’’ said the report.
On March 27, Muhyiddin announced a RM250 billion economic stimulus package to cushion the economic impact of the Covid-19 outbreak.
A total of RM128 billion will go towards the people’s welfare, RM100 billion to supporting businesses, including SME, and another RM2 billion to strengthen the country’s economy.