SME financing guarantee schemes, incentives may expand further in Budget 2020

KUALA LUMPUR: Small and medium enterprise (SME) financing guarantee schemes, other alternative forms of financing and incentives have been projected to expand further in Budget 2020.

According to RHB Investment Bank Bhd (RHB Research), SMEs play an important role in the Malaysian economy, contributing 37 per cent of the country’s gross domestic product (GDP) in 2018 - this figure is projected to rise to 41 per cent by 2020.

The research firm noted that SMEs comprise about 98.5 per cent of the total business establishments in the country and employ two-thirds of all workers in Malaysia.

“Adding on to measures introduced in Budget 2019 - which include a total of RM6.5 billion in SME financing guarantee schemes to facilitate financing for such firms and catalyse their digitalisation processes - Budget 2020 may see these guarantees expanded further to about RM8 billion to RM10 billion,” RHB Research said.

“To help diversify the financing ecosystem to help SMEs obtain funds, the Government may look to endorse other alternative forms of financing - for example, equity crowd funding, peerto-peer, private equity, and venture capital - as funding options for SMEs and start-ups.

“To encourage domestic direct investments, the Government may consider dishing out more tax and investment incentives, and matching grants for local companies.”

The research firm projected that the Government could even lower the tax rates for SME companies further to 15 to 16 per cent from 17 per cent in 2019.