SMEs still need financial assistance to stay afloat, says RAM

KUALA LUMPUR, Sept 21 — Small and medium enterprises (SMEs) and micro businesses need more supportive policies to stay afloat, says RAM Ratings. 

In a statement today, it said that based on its latest RAM Business Confidence Survey, the economy remains fragile, with uncertain prospects through the next three months.

“The overall RAM Business Confidence Index (RAM BCI) for 3Q 2020 hit a low of 33.7. This is substantially below the neutral point of 50, and reflects the disruptions plaguing small businesses amid the Covid-19 pandemic,” it said. 

It added that almost 90 per cent of the survey’s respondents cited weak economic conditions as their most significant challenge in the next three months.

It added that the government has made commendable efforts to assist SMEs and micro enterprises during the pandemic. 

“These include the loan moratorium, which has been a highly sought-after financial relief; some 86 per cent of the survey respondents have taken up this offer. Of these, almost 90 per cent need an extension beyond the expiry date of September 30, 2020, as cash flows remain tight,” it said. 

It added that more than half of the firms surveyed said that without an extension, they would face negative repercussions of either having to scale down or cease operations, or even default on their loans.

“Most of the respondents also value wage subsidies (68 per cent), loan subsidies (62 per cent) and grants (66 per cent) as aid to keep themselves afloat,” it said, 

The rating agency also said that the targeted approach by the government, based on firm size and sector, is the best way to assist firms. 

“The BCI survey suggests that the extension of the loan moratorium is most useful to bigger SMEs as they may have heftier loan commitments; up to 85 per cent of larger SMEs needed an extension, as opposed to 69 per cent of micro enterprises,” it said. 

However, it added that the impact of not having an extension is more detrimental to the latter. 

“Some 20 per cent of micro enterprises stated they would have to shutter their operations, compared to just eight per cent of SMEs,” it said. 

It said that amid the gloom, a silver lining emerges in that the survey reveals the resilience of SMEs and micro enterprises — even when prospects are bleak and challenges appear daunting, the majority of firms surveyed wanted to keep their businesses at status quo instead of scaling down through the next three months

“It also indicates that businesses are hopeful demand will eventually recover in the medium term.

“However, policymakers need to keep engaging with SMEs and micro enterprises as they need to  understand the specific requirements of and provide the necessary targeted financial aid to SMEs and micro enterprises – the backbone of Malaysia’s economy — to tide them over the current crisis,” it said. — Bernama