Over 3 million SMEs, individuals in Malaysia could tap targeted relief from Oct 1: UOB economists

THE move by Malaysia's central bank to extend relief to a targeted group of borrowers after a blanket moratorium expires on Sept 30 could apply to more than the 3 million individuals and businesses that Bank Negara Malaysia (BNM) estimated to be in need of such relief, said UOB economists.

More could be eligible for the extension if labour market strains persist into the fourth quarter and economic recovery remains uncertain, the economists said in a report this week.

The six-month blanket loan moratorium offered to Malaysian individuals and small and medium enterprises (SMEs) was offered due to a lockdown - or what Malaysia calls a movement control order - as implemented on March 18 to contain the pandemic.

As at July 20, Malaysia's blanket moratorium approach that started on April 1 has been applied to 7.7 million individuals - or 93 per cent of individual borrowers - representing a total loan value of RM38.3 billion (S$12.5 billion). It has also been applied to 243,000 SME borrowers - or 95 per cent of total SME borrowers - translating to a total loan value of RM20.7 billion.

The number of individual borrowers who have opted out of the moratorium and continued to repay loan instalments stood at 601,000 in July, up from 331,000 in April, the report said. The number of SME borrowers who chose to repay was 13,000 in July, compared with 5,000 in April.

With the blanket moratorium coming to an end in September, Malaysian Prime Minister Muhyiddin Yassin announced last week a targeted extension of the loan moratorium and repayment flexibilities for individuals and SMEs who continue to be affected by Covid-19.

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From Oct 1, individuals who have lost their jobs and who remain jobless for a further three months, would qualify for the targeted moratorium extension of three months. Those who are still employed but have had their salaries cut due to the Covid-19 pandemic will be granted lower loan instalments for at least six months, depending on the types of loan.

Affected borrowers will be offered revised instalment schedules for hire-purchase financing, too.

The UOB report cited the BNM's statement saying that the banks have committed to provide repayment flexibility to other individuals and SME borrowers affected by Covid-19, taking into account the specific circumstances of borrowers. This could mean allowing borrowers to pay only the interest portion of their loans for a specified period, or lengthening the overall loan period to reduce monthly instalments.

UOB economists Julia Goh and Loke Siew Ting said on Monday that the latest "targeted approach" is appropriate, given that most parts of the economy have resumed activity, with over 83 per cent of employees having resumed work.

"The flexibility given recognises that economic conditions remain difficult which warrants further assistance to those that are still affected while those that can afford to pay would resume repayments to lower overall debt and borrowing costs."

The rise in the number of individual borrowers opting out of the moratorium programmes is also an encouraging sign, they noted.