THE anxiety amongst the rakyat on whether the banks will extend the six-month loan moratorium after September in the midst of the recovery period was answered by the prime minister (PM) in his announcement yesterday, with more targeted and additional measures.

Just to recap the specifics on the moratorium, they are as follows:

1. A three-month extension of the loan moratorium for those who lost their jobs this year as well as for those who remain unemployed; and
2. Reduction in monthly instalments for those who experience pay-cuts, in proportion to the reduction in salary and subject to the type of financing.

Besides that, banks have also stated their commitment to assist the borrowers (individuals and SMEs) by only requiring the payment of interest for a period that has been fixed, extending the payment period to reduce monthly instalments and other relief measures until borrowers’ financial conditions become stable.

This announcement was indeed heading towards the right direction and welcomed as it is meant for Malaysians who are in relatively more unfortunate situations while considering those who are trying to stabilise their living conditions.

To show how much the loan moratorium has provided huge reliefs for many individuals and businesses, as of July 20, over 7.7 million individual borrowers (93% of the total) have benefited from the measure worth RM38.3 billion.

On the other hand, 243,000 SMEs (95% of the total) have also utilised the loan moratorium worth RM20.7 billion, based on the PM’s speech text.

In total, the value of loan moratorium, which has been utilised by the individuals as well as the SMEs, is RM59 billion.

Notably, Malaysia was said to be one of the earliest in the implementation of automatic loan moratorium compared to other countries that did not, such as Singapore, Thailand, the UK, Italy, the US and Canada according to Finance Minister Tengku Zafrul Tengku Abdul Aziz in Parliament.

So, it can be seen that this loan moratorium has managed to help the rakyat weather through the crisis in the short term.

Despite the short-term opportunity given by the banks for borrowers to save by participating in the moratorium, not all decided to opt in.

Therefore, the number of individual borrowers opting out rose from 331,000 in April to 601,000 in July. For SMEs, the number of non-participants jumped from 5,000 to 13,000.

The increase in figures were in tandem with the government’s decision to reopen economic sectors beginning early May which certainly helped to restart businesses that have been disrupted during the first few phases of the movement-control order (MCO).

This was then followed by supportive measures in the short-term economic recovery plan (Penjana) that was announced on June 5, such as the extension of the Wage Subsidy Programme and hiring incentives.

In a way, these moves have helped several parts of the economy to recover, which explains the opting out from the moratorium.

Nonetheless, there remains businesses and people struggling. As mentioned in my previous article, there are some statistics to support this statement.

In May, the overall unemployment rate escalated slightly to 5.3% compared with 5% in April as the number of unemployed went up by 47,300 to 826,100 persons.

If you look at the more updated figures, based on the Employment Insurance System (EIS) unemployment benefit claims, there was a total of 62,247 employment losses as of the third week of July.

The Edge also reported that a total of 4,542 applications to cease business operations were processed by the Companies Commission of Malaysia (SSM) during the MCO taking place between April 1 and July 19.

As we are still trying to recover from the unprecedented crisis, there seems to be a crucial need for banks to provide a buffer should more assistance be required in the future.

Prior to this latest announcement, the finance minister had already stated that banks faced losses worth RM1.06 billion per month during the moratorium period, which will bring about to a total loss of RM6.4 billion by the end of the measure.

So, the losses experienced by the banks explain the more targeted measures post-September in comparison to a blanket loan moratorium starting from April until September.

Again, the efforts of the government in addressing the loan moratorium appear positive as it was one of the emerging issues and suggestions raised by participants in the focus group discussion of EMIR Research for its upcoming quarterly poll. – July 30, 2020.

* Sofea Azahar is a research analyst at EMIR Research.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.