Malaysia Provides More Funding for SMEs

Posted by Written by Ayman Falak Medina Reading Time: 3 minutes
  • On April 6, 2020, the Malaysian government issued 10 billion ringgit (US$2.3 billion) worth of funding to assist small and medium-sized enterprises (SMEs).
  • The new measures provide new loans for SMEs, cuts interest rates, and offers grants.
  • Investors should seek the assistance of registered tax advisors to better understand how they can benefit from these relief measures.

On April 6, 2020, the Malaysian government issued extra funding worth 10 billion ringgit (US$2.3 billion) to support the country’s small and medium-sized businesses (SMEs).

The funding was approved after the government extended the nationwide lockdown by another two weeks to April 28. This latest measure was designed to bolster the government’s previous stimulus packages intended to help SMEs manage their cashflow and to retain employees.

Malaysia issued its first stimulus package in February 2020, valued at US$4.8 billion before a second stimulus package was issued in March, valued at US$57 billion. Together, the government’s total support outlay has reached US$64 billion, with the bulk of these incentives aimed at SMEs.

SMEs and micro-enterprises employ some two-thirds of the country’s total workforce and contribute to 40 percent of the economy.

What are the latest support measures?

The new measures cover wage subsidies, financial support for businesses, and interest rate cuts, among others. The Prime Minister has encouraged businesses to actively engage with employees to discuss employment terms, such as unpaid leave and pay cuts during the lockdown period.

He reiterated that any employment issues can be referred to the Department of Labor.

Increasing wage subsidies

Under the second package, the government allocated 5.9 billion ringgit (US$1.3 billion) for a wage subsidy scheme. Through this scheme, workers earning less than 4,000 ringgit (US$916) per month will be eligible to receive 600 ringgit (US$137) per month for the next three months. 

The budget for this scheme has now been increased to 13.8 billion ringgit (US$3.1 billion) and those eligible are still local workers earning below 4,000 ringgit (US$916) per month. Companies with 200 employees or more can receive the 600 ringgit (US$137) per head, whereas companies with between 76 to 200 employees will be eligible to receive 800 ringgit (US$184) per head.

Companies with up to 75 employees will be entitled to a wage subsidy of 1,200 ringgit (US$276) per month per head. Businesses must retain their staff for at least six months to be eligible for this aid (three months during the assistance period and three months after).

It is estimated that 4.8 million employees will benefit from this initiative.

Additional grants

The government has prepared 2.1 billion ringgit (US$483 million) worth of grants to SMEs.

The grant will cover the provision of 3,000 ringgit (US$691) for each micro-enterprise. Only businesses listed in the Local Authorities and Companies Commission of Malaysia (SSM) can qualify for this grant. The government hopes this can benefit 700,000 micro-businesses throughout the country.

Abolishing interest rates for micro-credits

The government will abolish the two percent interest rate for the micro-credit scheme. The scheme has been allocated 500 million ringgit (US$114 million) from the second stimulus package and allows SMEs to receive a loan of up to 75,000 ringgit (US$17,000).

Extra funding for Tekun Nasional

A sum of 200 million ringgit (US$46 million) has been allocated to Tekun Nasional, an  agency under the Ministry of Entrepreneurial and Cooperative Development providing financing facilities to SMEs. Through this program, SMEs can apply for loans of up to 10,000 ringgit (US$2,304) at zero percent interest.

Applicants should note that they can only choose from one the schemes: Tekun Nasional or the micro0credit scheme, and not both at the same time.

Cuts in foreign worker levy

Another initiative to reduce the financial burden of SMEs is to provide a 25 percent discount on foreign worker levies, where their work permits end between April to December 31, 2020. This reduction, however, does not apply to domestic workers.

Filing extensions for financial statements

Companies will be given a three-month extension for the filing of financial statements for businesses whose financial year ended between September 30 to December 31, 2019.

Moratoriums on loan repayments

Registered money lenders who offer credit facilities to businesses will provide moratoriums on loan repayments for six months starting April 2020.

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