Malaysian SMEs Receive Huge Support in Budget 2022

The government has fulfilled its promise to support the Small and Medium Enterprises (SMEs) with the implementation of various incentives to promote growth and recapitalise companies badly affected by the Covid-19 pandemic.

Budget 2022 has a total allocation of RM332.1bil, the largest-ever for the country involving RM233.5bil in administrative expenses, RM75.6bil in development, RM23bil for the Covid-19 fund and RM2bil for unexpected expenses. This surpasses Budget 2021 allocation of RM322.54bil by almost RM10 billion.

The government focuses on several sectors badly affected by the Covid-19 pandemic including tourism, retail, and small and medium enterprise (SME), in Budget 2022, which was termed by Prime Minister Datuk Seri Ismail Yaakob “from the people, by the people, for the people”.

In addition to getting the SMEs on their feet again, Budget 2022 would also generate more jobs to tackle unemployment and enable the recovery process to return the country and its economy to the pre-Covid-19 pandemic with new norms in place.

For the SMEs, the government has allocated an additional RM4.5 billion under Bank Negara Malaysia (BNM). BNM therefore will make various enhancements to its fund for SMEs to support businesses impacted by the pandemic.

For instance, the allocations under two existing facilities will be increased:

• RM2 billion will be added to the Targeted Relief and Recovery Facility (TRRF), bringing the total allocation to RM8 billion; and
• The Agrofood Facility (AF) will also be upsized by RM500 million, raising the total allocation to RM2 billion.

Targeted Relief and Recovery Facility (TRRF)

The RM6 billion Facility is upsized by RM2 billion to RM8 billion for Malaysian SMEs in the services sector affected by the reintroduction of COVID-19 containment measures (except tourism-related subsectors). Under the enhanced TRRF, SMEs can now utilise up to 30% of the financing approved to repay existing business financing (i.e. refinance).

Offered at a rate of up to 3.5% p.a., TRRF will be available through participating financial institutions, with guarantee coverage by Credit Guarantee Corporation (CGC) or Syarikat Jaminan Pembiayaan Perniagaan (SJPP).

The eligible sectors are:

1. Personal services (e.g. repair of computers / household goods, laundry, hairdressing, beauty)
2. Food and beverage service activities
3. Human health and social work activities
4. Arts, entertainment and recreation
5. Wholesale and retail trade
6. Business services (e.g. Professional, scientific and technical activities administrative and support service activities)

Agrofood Facility (AF)

The facility is to increase food production and for export purposes. The Budget 2022 has increased the allocation of the Agrofood Facility by RM500 million, to RM2 billion

BNM will also create two new facilities which will be available from January 2022:

A RM1 billion Business Recapitalisation Facility (BRF) will be created to strengthen the capital structures and help businesses seek financing while better managing their indebtedness levels.

Under the BRF, SMEs may obtain either financing in the form of equity or equity-type instruments or debt financing combined with equity in partnership with third-party equity financiers (blended finance)

A RM1 billion Low Carbon Transition Facility (LCTF) will be established on a matching basis by participating financial institutions to help SMEs embrace sustainable and low carbon practices including to increase usage of sustainable raw materials and renewable energy, and to also improve energy efficiency of buildings or machinery.

In addition, other facilities continue to be offered include the High-Tech Facility – National Investment Aspirations (HTF-NIA), SME Automation and Digitalisation Facility (ADF) and Micro Enterprises Facility (MEF).

In all, the total available funds under the Fund for SMEs stands at RM11.2 billion.

Other Incentives for SMEs

• SME Digitalisation Grant Scheme to be increased to RM200 million in 2022, with RM50 million for Bumiputera micro entrepreneurs in rural areas
• Govt to continue supporting equity crowdfunding and peer-to-peer financing with RM80 million allocation in matching grants under Malaysia Co-Investment Fund, in addition to Bank Pembangunan Malaysia Bhd’s RM100 million investment
• Matching grant of RM100 million for Bumiputera SMEs to explore aerospace industry
• SMEs allowed to postpone income tax instalments for six months until June 30, 2022
• RM100 million for smart automation matching grants to benefit 200 manufacturing and services companies
• RM250 million allocated for Shop Malaysia Online and Go-eCommerce Onboarding