Another Moratorium Will Only Prolong Smes Problems Says Group

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National Recovery Council chairman Muhyiddin Yassin has called for another round of moratorium to be given to struggling SMEs.PETALING JAYA: A group representing small and medium enterprises (SMEs) has expressed surprise over the proposal by National Recovery Council (MPN) chairman Muhyiddin Yassin for another round of moratorium to be given to struggling SMEs.
The Small and Medium Enterprises Association Malaysia (Samenta) said another loan moratorium will only exacerbate the SMEs’ problems.
On Saturday, Muhyiddin was reported as saying that banking institutions should offer further loan moratoriums to SMEs, especially those still struggling to recover from the pandemic.
He said some SMEs have asked for financial assistance since they are still unable to recover while their businesses continue to decline.
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In addition, he said, the three recent hikes in the overnight policy rate (OPR) have affected the performance of SMEs, which contribute to 90% of the country’s economic activity.
Samenta chairman William Ng expressed surprise over the proposal by the former prime minister.
“We believe he may have been misinformed or given the wrong feedback,” Ng told FMT. “While it is true that some SMEs continue to have problems servicing their loans, a moratorium at this stage will only exacerbate their problems.
“Prolonging the loans is not the right way out for SMEs. If that’s the best the council can come up with, then we must question its existence.”
He said resolving the labour crunch should be the top priority as this is the main issue faced by the SMEs.
Next, the government should consider lowering tax rates for these enterprises for the next two years.
Ng also said many viable SMEs are struggling to obtain loans, because of their poor track records over the past two pandemic-hit years.
“We should facilitate our financial institutions and other finance providers to obtain and use alternative data to make their credit assessments,” he said.
“With the increase in OPR, we will also need a mechanism to lower the cost of financing for SMEs, including the provision of soft loans, speeding up the approval and disbursement process, and mandating banks to work with defaulting SMEs to restructure their loans.”
Chin Chee Seong, secretary-general of the SME Association of Malaysia, told FMT that while he agrees with Muhyiddin’s suggestion, Bank Negara Malaysia is unlikely to support the former prime minister’s suggestion.
“Moratorium involves commercial banks, and commercial banks basically look at profits and they do not want to subsidise (SMEs),” he said.
“In addition, banks also have to be responsible to their shareholders as they are publicly listed companies.”
Meanwhile, economist Shankaran Nambiar of the Malaysian Institute of Economic Research said the SMEs are not in a dire enough situation to need another round of loan moratorium.
He also said most indicators show the economy to be improving.
“Under these circumstances, unless there is compelling data, the suggestion to consider a moratorium should be studied carefully before rushing into a decision,” he told FMT.
“The finance ministry and BNM should study the National Recovery Council’s empirical findings on this matter.” - FMT

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