SMEs, micro firms still need financial help: RAM survey
They require further support to stay afloat as economy remains fragile
PETALING JAYA: The latest RAM Business Confidence Survey indicates that small and medium enterprises (SMEs) and micro businesses still need supportive policies to stay afloat, as the economy remains fragile, with uncertain prospects through the next three months.
In a statement, RAM said its Business Confidence Index (BCI) for third-quarter 2020 hit a low of 33.7, substantially below the neutral point of 50, and reflects the disruptions plaguing small businesses amid the Covid-19 pandemic.
“Almost 90% of the survey’s respondents cited weak economic conditions as their most significant challenge in the next three months,” it said.
While it lauded the government’s efforts to help SMEs and microenterprises, including the loan moratorium, its survey showed that some 86% of the respondents have taken up this offer with almost 90% need an extension beyond the expiry date of Sept 30, as cash flows remain tight.
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 loan. Most of the respondents also value wage subsidies (68%), loan subsidies (62%) and grants (66%) as aids to keep themselves afloat.
“A 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% of larger SMEs needed an extension, as opposed to 69% of microenterprises,” it said.
However, some 20% of microenterprises stated they would have to shutter their operations, compared with just 8% of SMEs, if an extension was not made available.
In terms of the type of assistance needed, a respective 79% and 75% of medium and small firms indicated the need for wage subsidies to continue, as opposed to 51% of microenterprises. In contrast, microenterprises expressed their preference for subsidised loan schemes.
“Amid the gloom, a silver lining emerges in that our survey reveals the resilience of SMEs and microenterprises. 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,” RAM said.
It concluded by urging policymakers to keep engaging with SMEs and microenterprises in order to understand the specific requirements of and provide the necessary targeted financial aid to tide them over the current crisis.