In the economic stimulus package announced on March 27, 2020, Prime Minister Muhyiddin Yassin announced that steps will be taken to alleviate the burden of the COVID-19 pandemic on SMEs.
A total of RM4.5 billion that encompasses 5 main initiatives will be used to carry out these efforts.
Easier Financing Access For SMEs
First of all, the government will add funds to the RM3 billion Special Relief Facility for SMEs, bringing the total to RM5 billion.
In addition, the interest rate for the entire fund will be reduced from 3.75% to 3.5%.
Secondly, the size of the fund will also be increased by as much as RM1 billion to RM6.8 billion under Kemudahan Semua Sektor Ekonomi to enhance financing access to all SMEs.
Third, the government will provide additional funds of RM500 million under the Micro Credit Scheme which makes a total of RM700 million allocated for easy financing.
The scheme will be run by Bank Simpanan Nasional, who’s offering only 2% interest free of charge.
Loan eligibility requirements will also be extended with a minimum of 6 months of operation compared to 1 year of operation.
The financing amount is also increased from a maximum of RM50,000 to RM75,000 per entrepreneur.
The initiative is open to all micro entrepreneurs in all business sectors including taxi operators, bus operators, the creative industry, and online traders.
Fourth, for SMEs with business records of less than 4 years, you can also take advantage of the BizMula-i and BizWanita-i Syarikat Jaminan Kredit Malaysia Berhad (CGC) schemes for financing up to RM300,000.
The fifth initiative includes Syarikat Jaminan Pembiayaan Perniagaan (SJPP) providing RM5 billion worth of guarantees as well as increasing the guarantee rate from 70% to 80% for SME companies that have trouble getting loans.
To Alleviate Cash Flow Issues
Undoubtedly, many SMEs are facing cash flow issues, so the government also announced a few initiatives to tackle them accordingly.
To start off, EPF will introduce the Employment Consultation Service programme on April 15, 2020.
This service includes options for delaying payments, restructuring, and rescheduling employer contributions.
The government expects this measure to provide cash flow savings to employers at an estimate of RM10 billion.
The initiative will benefit more than 480,000 SMEs and affected companies, while saving over 8 million jobs.
Secondly, there is also an exclusion from levy payments for the Human Resources Development Fund (HRDF) for all sectors for a period of 6 months beginning April 2020.
This measure is expected to assist company cash flow with an overall saving of RM440 million.
Concerned over the problems faced by some 750,000 SMEs, the government has also allowed the suspension of income tax instalment payments for all SMEs for a period of 3 months beginning April 1, 2020.
This is in addition to the previously announced measures under which the government allowed the postponement of tax instalment payments to businesses affected by the tourism sector for 6 months beginning April 1, 2020.
For those in other affected sectors, you are allowed to amend the tax amount income incurred in the third, sixth and ninth monthly instalments during the business period.
As per the government’s previous announcement, it also welcomes the willingness of banking institutions to offer a 6-month delay or loan repayment moratorium, conversion of credit card balances to term loans, and restructuring of corporate loans to assist SMEs and individuals.
Muhyiddin stated that this step is important in enabling companies to continue maintaining employment and to continue their business activities. This initiative involves a total of at least RM100 billion.