PETALING JAYA: The SME Association of Malaysia has expressed support for Prime Minister Datuk Seri Ismail Sabri Yaakob’s(pix) call to all commercial banks not to take legal action against hawkers and petty traders who failed to repay their loans.

It also called for similar exemption for small and medium enterprises (SMEs), which have been affected adversely by the pandemic, to allow them to recover and contribute positively to the real economy and financial markets.

“The pandemic has placed enormous strains on corporate cash buffers. Credit lines, if any, were likely to be strained,” SME Association of Malaysia National Secretary-General CS Chin said in a statement today.

“Many businesses had been running operating losses, with significant drops in revenue, with lesser drops in operating expenses.

“As a result of the economic lockdown caused by the pandemic, several businesses had either closed or were barely surviving. Fortunately, the reopening of economic and social activities in mid-August has improved business sentiment.”

Chin said most businesses are barely surviving or trying to improve their cash flow, and business activity is vibrant traditionally during the November to February period.

“This period will encourage businesses to recover, increase employment, and promote growth.

“Delays in legal action against SMEs, as well as allowing a rollover of maturing debt, will allow more businesses to cover their operating expenses and interest payments with their cash buffers and revenues in the future,” he added.

It is important to have policy intervention to avoid the negative consequences for the real economy and financial markets.

By providing guarantees or credit enhancements, the government can ease the rollover of credit lines. This will reduce bank capital needs when businesses use them, Chin pointed out.

“This reprieve for SMEs will allow them to recover during this vibrant period. Looking at the big picture, this will contribute positively to the real economy, financial markets, and financial institutions,” SME Association of Malaysia national president Ding Hong Sing said.