THE anxiety among the rakyat over whether banks would extend the six-month moratorium on loan repayments after September was answered by Prime Minister Tan Sri Muhyiddin Yassin in his announcement on Wednesday of targeted moratorium extensions (“Targeted moratorium extension for another three months”, The Star, July 29; online at bit.ly/star_banks).
The loan repayment moratorium has provided huge relief for many individuals and businesses: as at July 20, over 7.7 million individual borrowers (93% of the total) have benefited from the measure worth RM38.3bil. And 243,000 SMEs (small and medium enterprises), or 95% of the total, have also utilised the measure for a total of RM20.7bil. In total, the value of the moratorium is RM59bil.
Despite the short-term opportunity given by the banks for borrowers to save by participating in the moratorium, not everyone decided to opt in. The number of individual borrowers opting out rose from 331,000 in April to 601,000 in July. For SMEs, the number of non-participants jumped from 5,000 to 13,000 in the same period. The increase was in tandem with the government’s decision to reopen most economic sectors beginning early May, which helped to re-start businesses that had been disrupted during the earlier phases of the movement control order (MCO).
This was then followed by supportive measures in the short-term economic recovery plan announ-ced on June 5, such as the extension of the wage subsidy programme and hiring incentives. These moves helped several parts of the economy to recover, which explains those opting out from the moratorium.
Nonetheless, many businesses and individuals are still struggling, as the following figures denote: in May, the overall unemployment rate escalated slightly to 5.3% compared with 5% in April as the number of unemployed went up by 47,300 to 826,100.
If you look at the more updated figures, based on the Employment Insurance System unemployment benefit claims, there was a total of 62,247 employment losses as at the third week of July. There were also reports that 4,542 applications to cease business operations were processed by the Companies Commission of Malaysia during the MCO period between April 1 and July 19.
As we are still trying to recover from this unprecedented crisis, there is a crucial need for banks to provide a buffer should more assistance be required in the future.
Prior to this latest announcement, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz stated that banks faced losses worth RM1.06bil a month during the loan moratorium period, which will bring about a total loss of RM6.4bil by the end of the measure.
These losses by the banks explain the more targeted measures post-September in comparison with the blanket loan moratorium from April to September.
The efforts of the government to address the loan moratorium appear positive, as it was one of the emerging issues and suggestions raised by participants in a recent focus group discussion.
Research Analyst, Emir Research
Note: Emir Research is a think tank focused on strategic policy recommendations.
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