Putrajaya should have adopted ‘opt-out’ approach for automatic loan moratorium, says think-tank

KUALA LUMPUR, July 1 ― Emir Research has viewed that the automatic loan moratorium announced under the government’s RM150 billion National People’s Well-Being and Economic Recovery Package (Pemulih) recently should be an “opt-out”, rather than an “opt-in” approach.

The independent think-tank cautioned that the benefit might not reach all the deserving categories, given the increasing evidence that nearly all small and medium-sized enterprises (SMEs) are drastically affected by the Covid-19 pandemic.

“Leaving the loan moratorium facility for SMEs be subject to review and approval by banks has a danger.

“Apart from financial leverage, it could be more of the toxic combination of operational leverage with falling sales and lower revenues that pushes many SMEs to the point of closure,” it said in a statement recently.

Citing a recent nationwide survey conducted by Micro, Small and Medium-sized Enterprises Association in collaboration with the Klang Parliamentary Office, Emir Research said rentals constituted about 35 per cent of businesses’ operating expenses. 

It said the study revealed that only about 28 per cent of surveyed SMEs received a 30 per cent reduction from their landlords versus those who did not receive (51 per cent) and those who did not know about the scheme (21 per cent). 

“Among the most cited reasons why the landlord refused to give waiver or reduction of rental included: the government has offered cash grants to SMEs, the landlord has to service his bank loan (another strong argument in favour of automatic loan moratorium for all), and the landlord is facing losses as well,” it said.

With that, EMIR Research said it appeared that “incentivising” the landlords into giving discounts or waivers did not seem to work well.

Hence, the think tank’s standpoint that it should be an automatic “opt-out”, rather than an “opt-in” moratorium void of any conditions upon application for all, including non-micro SMEs. 

Prime Minister Tan Sri Muhyiddin Yassin unveiled the Pemulih package on June 28, 2021, with the aim to provide comprehensive assistance to the people, focusing on continuing the people’s welfare agenda, supporting businesses and increasing vaccinations.

Muhyiddin said under the financial assistance package, a six-month moratorium would be given to all individual borrowers whether they are from the B40, M40 or T20 groups, or micro-entrepreneurs.

“You just need to apply and approval will be given automatically.

“This facility is also offered to SME operators affected, subject to checks and approval by the banks,” he said.

Meanwhile, Emir Research opined that having a slightly broader fiscal space would help the government better to see the rakyat through the devastating impact of the pandemic.  

“As such, the debt-to-gross domestic product (GDP) ratio ceiling should be immediately lifted to 65 per cent of GDP for Malaysia Government Securities (MGS), Malaysian Government Investment Issues (MGIIs) and Malaysia Islamic Treasury Bills (MITB) borrowings,” it said. ― Bernama