WITH the end of the six-month loan moratorium in September, many small and medium enterprises (SMEs) have resumed their loan instalments, but it does not mean things are necessarily looking up for them, association leaders said.

Many are opting to restart repayments partly because business is slightly better under eased movement restrictions, and also because they do not want to accumulate interest payments.

However, there are also worries that should the current conditional movement-control order (CMCO) be extended in the Klang Valley, which is the country’s industrial hub, SMEs will again face cash flow problems.

SME Association of Malaysia president Michael Kang said allowing almost all economic activities to operate so far has enabled SMEs to service their borrowings.

“At least 50% of our member companies have started repaying loans. If they don’t, they’ll have to bear more in interest,” Kang told The Malaysian Insight.

Some 30% of the association’s members have also applied to banks to restructure their loans.

Bank Negara Malaysia (BNM) deputy governor Jessica Chew on October 14 said the total value of loan repayments had reached 70% of the pre-loan moratorium period.

BNM data also showed two million borrowers had been engaged by banks by the end of September, out of which 514,000 were rescheduling and restructuring applications.

Of the number, 98% have been approved.

Still, Kang said about 20% of association members are hoping for an extended moratorium when Budget 2021 is tabled this Friday, as they face unresolved cash flow issues.

“For some, the worst is yet to come,” said Kong.

These include SMEs in the tourism and services industries, which have been the hardest-hit by the pandemic. They have had no customers between March and June and consumer sentiments were still grim for July and August.

Customer count has not picked up, as a third wave of infections began in September.

Kong urged the government to render more assistance to SMEs under Budget 2021.

“This year is all about survival for SMEs. They have to adapt and change their business model to stay open.

“Can the budget for next year make it a year of recovery and transformation? It can help open up corporate properties and the international market,” he said.

Kang also said while the CMCO in Selangor and Kuala Lumpur is not affecting economic activities too much, the same cannot be said for other states that rely on the spending power of Klang Valley residents, who are now unable to travel domestically due to the CMCO in the Klang Valley.

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) also found that some of its members want the loan moratorium to be extended.

Some 69.2% of 91 respondents surveyed said they wanted an extension.

Those who did not said their cash flow situation had improved, and they would also rather not pay extra interest.

ACCCIM’s SMEs and taxation committee head Koong Ling Long said the association’s survey results have been handed over to BNM as input.

“Since the blanket moratorium ended in September, many businesses have said they can repay loans in October, but there is still a group that wants an extension.”

ACCCIM also found some members have had issues when discussing extended moratorium on their loans with banks. Banks are, among others:

• asking SMEs to take another short-term, high-interest loan to pay off the existing loan;
• advising applicants against a moratorium extension as it will affect their credit score;
• offering to restructure but not extending loans;
• different documents are required by different banks; and
• lengthy application process and too many supporting documents required.

Koong said for some SMEs, even when they are allowed to operate under the partial lockdown in Kuala Lumpur and Selangor, cash flow issues still persist.

This is due to consumer sentiment rather than movement curbs, since the government allowed almost all economic activities to stay open.

“With the third wave of Covid-19 in September and October, things are back to square one with a sharp fall in consumption. People are now unwilling to go out and spend as they are worried about the pandemic.”

Koong said SMEs should intensify digitalisation efforts as banks are offering financial assistance specifically for this, adding that businesses should take advantage of it when discussing their moratorium extensions. – November 4, 2020.