SME group: Banks’ preparedness will help alleviate SMEs’ financial burden

SME group: Banks’ preparedness will help alleviate SMEs’ financial burden

PETALING JAYA: A coalition of small-medium entrepreneurs and industries claimed that several banks are rejecting loans applied under the recently announced stimulus package to help severely distressed sectors” of the economy from the Covid-19 outbreak.

In a statement by Covid-19 Special Task Force Secretariat for SMEs, SMIs, NGOs and Entrepreneurs said several of its members had their applications for such loans rejected.

The secretariat’s spokesperson Shahul Dawood said “We have called up 7 (seven) local financial institutions and all our members have met with the same response, some citing that there is no directive from the top and many reluctant to come forward to help proactively”.

This is contrary to the Bank Negara Malaysia statement on RM3.3 billion set aside for small-medium enterprise (SME) financing as part of the stimulus package.

Earlier, BNM said SMEs may access three of its financing facilities, namely the Special Relief Facility (SRF), Agrofood Facility (AF) and SME Automation and Digitalisation Facility (ADF).

“ The ground reality is different, the government is doing enough but commercial banks are not ready to help the rakyat” Shahul said.

“There seems to be a disconnect between the government and the banks, we as the business community, will be the first to realize that financial institutions have a fiduciary duty to their shareholders to ensure profitability and manage the portfolio risk”.

“These are trying times and a ‘business as usual’ approach by the institutions is going to bring the economy to a grinding halt. ” he said in a statement.

Shahul said while the industry was seeking a mix of grants, tax relief and loans, the financial institutions is seemingly careless and somewhat complicit in wanting to derail the SMEs .

He also underlined few key points in the statement to improve the current situation for SMEs:

  • We the SME and Entrepreneurial community again applaud the move by Bank Negara Malaysia in freeing up liquidity in the monetary system. Bank Negara has announced that the statutory reserve requirement (SRR) will be lowered by 100 basis points from 3% to 2% effective today. This supports the efficient functioning of the domestic financial markets and facilitate effective liquidity management by the banking institutions. These combined measures will release approximately RM30 bil worth of liquidity into the banking system.
  • Blanket “penalty free” approach to all SMEs and workers.The benefit must be extended automatically, blanket, without risk and credit profiling. It cannot be cherry picking and case by case basis. The deferment must be cost free and not have hidden penalty and late charges coupled with punitive interest rates – this will effectively snowball into a penalty laden payback after the 6 months moratorium which negates the original intent.
  • The Government must provide a blanket 6 months moratorium to all stakeholders – SMEs, SMI’s, microbusiness community, small entrepreneurs, workers of these SMEs and micro business enterprises, daily wage earners and also that of the unemployed personnel and those who have undergone pay cuts.
  • All financial products covering both the business as well as the business facilities – this includes but not limited to business loans, revolving facilities, margin accounts, personal loans, credit cards, overdrafts and hire purchases.
  • Financial institutions continue to use their internal credit scoring systems and external reference agencies like CTOS to asses the stimulus package that the government has announced, especially the RM 3.3 billion for the SMEs’ they must start disbursing the amount immediately, with minimal paper work and without using previous credit scores as a guide. Otherwise there will be social equitability to this acute financial recourse that MF has set our for Malaysian SMEs.

Shahul urges the finance ministry and the central bank to proactively instruct the banks to cooperate with the business community .

“Otherwise we are headed for a free fall very soon.”

By: Hema Subramaniam