Grants are preferable for vulnerable SMEs than loans - ISIS Analyst

KUALA LUMPUR, April 10 -- Grants will provide a stronger buffer for vulnerable small and medium enterprises (SMEs) to avoid insolvency compared with loans, said an economic, trade and regional integration analyst.

Calvin Cheng from the Institute of Strategic and International Studies (ISIS) said loans could be a burden to vulnerable SMEs in addition to the permanent revenue loss incurred by them due to the Movement Control Order (MCO) amid the COVID-19 pandemic.

Some SMEs, he stressed, cannot afford to pay off their debts in the present situation.

“Currently, there is only one grant -- the Special Prihatin Grant that is only for micro SMEs with less than five employees -- of RM3,000 each.

“So the amount is low and the coverage is very narrow,” he said during a webinar hosted by think-tank Research For Social Advancement (REFSA) titled “Flattening the Recession Curve: Saving SMEs and Preserving Jobs.”

In addition, he noted, Bank Simpanan Nasional under its micro credit loan scheme is offering zero interest to the same category, i.e. micro SMEs.

Meanwhile, the SME Association of Malaysia said the government should set a timeline for approval of loans.

Its president Datuk Michael Kang said the slowdown in bank lending has led to cash flow problems for SMEs.

“If the bank loan process drags on for a few more weeks, I think by April or May, no matter what the government can give, like wage subsidy for them to continue their business, they’d rather shut down and lay off their employees,” he said.

Kang said based on the association’s study, 33.3 per cent of the SMEs reckoned their cash could only last until March and about 37.8 per cent said their cash might last until April.

SMEs make up 98 per cent of businesses and contribute to nearly 70 per cent of jobs in the country.

-- BERNAMA