A refined approach needed to support SMEs

The Star

06-05-2025

PETALING JAYA: A more nuanced approach to supporting small and medium enterprises (SMEs) is needed, in addition to the latest measures announced by Prime Minister Datuk Seri Anwar Ibrahim in response to the tariffs imposed by the United States on Malaysia.
In his speech to Parliament yesterday, Anwar announced that the government has increased the Business Financing Guarantee Scheme by RM1bil to assist SME exporters in obtaining loans from banks.
The government has also increased soft loans from development financial institutions by RM500mil to support entrepreneurs.
Currently, a baseline tariff of 10% has been imposed on all goods entering the United States from all over the world, while the 'reciprocal tariffs' announced on April 2, which in Malaysia's case stands at 24%, have been suspended for a 90-day period from April 9 pending discussions.
SME Association of Malaysia national president Dr Chin Chee Siong told StarBiz that for financially sound businesses that need bridging loans, these measures would help.
'This is good for businesses that need funding immediately, for example, a tourism business that need cash flow to run tours. If the business is good, then it will be fine,' he said.
Chin noted that SMEs account for at most 13% of the country's total exports, but the tariffs and the government's measures present opportunities for further growth.
'The government should encourage more joint ventures with foreign businesses, such as those from China, in which Malaysians take up the majority stake and run them,' he said.
Chin pointed out that the funding from these measures can be better deployed by enabling Malaysian businesses to invest in these ventures.
'Malaysians will not mind bearing the risk if they are running the business. New technology and knowledge will be brought in, and there will be employment opportunities for Malaysians,' he added.
UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said financing alone would do little to address the root cause, as Malaysian businesses must reposition themselves to compete with low-cost manufacturers in China and Vietnam.
'Unless financing is explicitly tied to productivity upgrades, export diversification, or supply chain reconfiguration, its impact will be marginal,' he noted, adding that transition grants, market-entry subsidies, or strategic tax relief would do more to catalyse the structural shifts needed.
On whether SMEs should take on more loans, Sedek said: 'The government's reliance on credit-based solutions assumes that exporters are facing a liquidity issue, when in fact, many are grappling with a profitability crisis triggered by weak demand, tighter margins and intensifying competition from China's lower-cost goods.'
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid does not believe the measures will impact Malaysia's fiscal deficit target of 3.8% of gross domestic product this year.
He explained that the extra RM1bil are guarantees, while grants, which are a form of transfer that need not be repaid, would have an impact.
He further noted that government assistance aimed at accelerating productive capacity – such as capacity-building programmes for SMEs to make their businesses more resilient – would be preferable to subsidies for consumption, which benefit people immediately.
'At the end of day, it is a policy choice and whether the government can afford to fund the programmes,' Mohd Afzanizam said.