• Fatihah Abdullah

SME and Banks - The Problems and Solutions

SME companies or small medium-sized enterprises are considered as the backbone of the economy. In 2016, the Department of Statistics Malaysia (DOSM) reported that there are 907,065 SMEs established in Malaysia [1]. Below is the segregation of the SMEs companies according to the sectors in Malaysia:-



However, in the end of 2019, the world has been facing a pandemic known as Covid-19. As a safety measure, the government enforced a movement control order (MCO) which affected the economy badly. To be precise, Malaysia loses RM2.4 billion everyday as businesses are not allowed to be operating during the MCO [2].


As a result, most of the SMEs are closing down as those companies are unable to sustain the businesses during the MCO. Although there are some incentives provided by the government, those companies are unable to survive as the operating expenses are high and there is no savings left to pay the bills that have already been piled up.


However, in the end of 2019, the world has been facing a pandemic known as Covid-19. As a safety measure, the government enforced a movement control order (MCO) which affected the economy badly. To be precise, Malaysia loses RM2.4 billion everyday as businesses are not allowed to be operating during the MCO [2].


As a result, most of the SMEs are closing down as those companies are unable to sustain the businesses during the MCO. Although there are some incentives provided by the government, those companies are unable to survive as the operating expenses are high and there is no savings left to pay the bills that have already been piled up.



Based on Table 1, all the banks have similar features such as the term loan and overdraft facilities. However, what makes them different is the process. Certain banks enhance strict regulations for the SME companies to meet. Most banks prefer to check the financial operation and predict whether the companies are able to afford a loan. Hence, it is advisable to apply for financial aid from more than one bank. Beside, there are other things to take into full consideration. The interest rate is known as the crucial part in applying for loans from banks as the higher the interest rate, the higher the repayment loan.


In some cases, certain banks add a new type of financial aid especially during this current pandemic. Of course the most affected companies are tourism companies. In fact, a well known company, AirAsia Berhad is also facing the same problem [3]. The employees are being retrenched and some of them are being forced to take unpaid leaves [4]. This is because most of the end users are aware of the danger and risks they will be taking if they decide to go for a vacation. To make it worse, they cannot even go for a vacation even if they want to due to the government orders. Therefore, financial aid is a need for the tourism companies in order to sustain the business.


Other than that, some banks such as Affin Bank, CIMB Bank and Maybank do have their own section for SME companies. From there, the entrepreneurs will be provided with solutions to assist them in managing their companies. Another reason is the problem the entrepreneurs face is not only the financial problem, certain SME companies encounter other problems that may disrupt their business operations. This may include in preparing the payroll. Of course there is softwares that may help them in preparing the staffs’ payroll. However, certain SME companies consist of small companies. These small companies might have only one or two staff and it is inefficient to pay a certain amount of money just for a software.


A software may include the installation fees, license fee and also maintenance fee. It can cost almost RM5,000 just to install the software. In some cases, the staff have to undergo training before they are ready to use the software which has to be put into as an additional cost. The banks have looked through in detail these cases and thus, they provide the solutions. For example, RHB Bank introduces Smart Payroll. Basically, the employees will get their payroll on the same day once the authoriser approves the transaction on the same day. The authoriser is the one who will be authorising the payment which can be considered as the top management of the SME companies.


In addition to the solutions provided, there is actually a bank for SME companies known as SME bank. This bank is owned by the Ministry of Finance and regulated by Bank Negara Malaysia. It offers even better solutions other than supporting the SME companies in many ways. Though only 4.32% of the SME companies are construction companies, the SME bank does provide financial aid specialists in financing this sector.


To put into summary, there are many solutions provided by the banks in assisting the SME companies. This is to ensure that the entrepreneurs and future entrepreneurs maintain their business efficiently without failing again and again.


REFERENCES


[1] Department of Statistics Malaysia, Economic Census 2016 - Mystate Statistic, 2017.


[2] Hasimi Muhamad, Malaysia loses RM2.4 billion a day throughout MCO - Prime Minister, 2020.


[3] Bloomberg, Covid-19: AirAsia, like other low-cost airlines, fighting for survival, 2020.


[4] Najib Aroff, AirAsia terminates 111 flight attendants, 172 pilots, 50 engineers, June 4th, 2020.


APPENDIX



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