Additional measures help SMEs encounter tight cash flow

The RM10 billion Prihatin Package for Small and Medium Enterprises (SMEs) (Additional Measures) will help to soften the impact of the Movement Control Order (MCO) on SMEs and micro businesses, says Ambank Research.

In a note today, the bank said many SMEs are experiencing tight cash flows due to zero or minimal sales revenue.

“But the tight cash flow is not just because of the MCO. Businesses are also affected by the slow andinconsistent implementation of policies and measures, as well as trade wars and other domestic challenges in the past,” it said.

The research house said without these additional measures, even if the MCO is lifted, demand is expected to be weak for some time due to travel aversions and social distancing, and it noted that not every small business is equipped to survive the downturn.

The drop in consumer and corporate spending will intensify the adverse chain reaction that will fuel the collapse of micro businesses, especially the younger and smaller businesses due to their highly vulnerable situation, it said.

“Generally, the older and larger businesses are more likely to withstand an economic crisis. Exports will stay weak from lockdowns and commodity prices will be soft.

“As small businesses contribute disproportionately to job loss during recessions, policy responses are necessary,” it said.

With the additional measures, plus the increasing focus on micro businesses which make up a big share of the SMEs, the support will more likely help reduce bankruptcies and bad loans.

“There could be some relief on job losses which remain a major concern although these are expected to vary considerably according to the age and size of the small businesses,” Ambank Research said.

SMEs and micro-businesses make up two-thirds of the workforce and contribute 40 per cent to the country’s gross domestic products. - BERNAMA