Many Small-Medium Enterprises (SMEs) have been badly affected by the Covid-19 pandemic. How can the latest PENJANA incentives help SMEs to mitigate the pandemic’s impact?

The Economic Recovery Plan, or more commonly know as PENJANA, that was announced by the government recently contains several initiatives aimed at stimulating the Malaysian economy and to propel local businesses.

We highlight some of the initiatives and practical insights that might be useful to business owners of small- and medium-sized enterprises (SME) and aspiring entrepreneurs.

#1. Digitalisation of SME Business

Key Facts

  • RM2 billion fund to drive Malaysia’s economy with the process of digitalising local businesses, foster innovation and develop domestic venture capital.
  • Encourage the utilization of e-commerce by micro enterprises and SMEs with government-private partnership to provide seller support, trainings and sales subsidy organized by MDEC with selected e-commerce platforms.
  • Opportunity for entrepreneurs to move their businesses online with established e-commerce platforms (as opposed to creating your own e-commerce platform that may require more resources to start).
  • 5 key digitalisation areas outlined by the Malaysian government:
    1. Digital marketing/sales
    2. Electronic point of sales system (e-POS)
    3. HR Payroll System/CRM
    4. Procurement
    5. Enterprise Resource Planning system (ERP)/Accounting & Tax

What You Can Do

  1. Think about what it means to digitalise your business to move your products and services into the digital environment, especially for current brick-and-mortar only businesses.
  2. Do a cost-benefit analysis of digitalising your business (increased short term costs, reduced mid-long term costs, increased security, improved productivity) versus the cost of not digitalising your business (being disrupted, poor customer experience, cost of storing and retrieving physical documents).
  3. Check if you are eligible
    • 60% owned by Malaysian
    • Registered in Malaysia
    • In operation 1 year above with minimum annual sales of RM100,000 for 1 year in operations OR minimum annual sales of RM50,000 in preceding 2 years of operations
  4. Apply for MDEC SME Digitalisation Grant (mdec.my) where the Government will provide a 50% matching grant of up to RM5,000 per company for the subscription of the above services. This matching grant will be worth RM500 million over 5 years, limited to the first 100,000 SMEs applying to upgrade their systems.

 

#2. Increased SME Financing Options

Key Facts

  • Maximum loan of RM500,000 for SMEs to have cash flow support for continued business operations.
  • RM400 million for micro-financing scheme with RM50 million for female entrepreneurs.
  • Investment fund will be established that will match private capital investment capital investment with selected venture capital and early stage tech fund managers.
  • Government has announced that international investors who are interested to participate include renowned venture capitalists like 500 Startups, SK Group, Hanwha Asset Management, KB Investment Co Ltd, Provident Growth, and The Hive.

What You Can Do

Look at your various SME financing options and apply for any that are applicable to your business financing needs.

  1. PENJANA SME Financing (PSF) / for sustaining business operations to assist SMEs adversely affected by COVID-19 / available June 2020 / 3.5% concession rate / up to RM500k per SME / Total RM2b (penjana.treasury.gov.my & respective banks’ websites).
  2. PENJANA Tourism Financing (PTF) / finance transformation in tourism sector to remain viable and competitive in new normal / available July 2020 / RM1b total financing (BNMgov.my).
  3. PENJANA Microfinacing / support micro enterprises / available June 2020 / 3.5% interest rate / up to RM50k per enterprise / Total RM400m including RM50m for women entrepreneurs (tekun.gov.my & mybsn.com.my).
  4. Bumiputera Relief Financing / ensure sustainability of Bumi entrepreneurs for working capital, operating expenditure, system automation, social distancing practices (e.g. PPEs) / available June 2020 / 3.5% interest rate / financing RM100k – RM1m for up to 5 years / moratorium of 6 months from disbursement (punb.com.my & mara.gov.my).
  5. SME Go-Scheme / Liquidity for SME contractors and vendors awarded small government projects under Pakej Ransangan Ekonomi (PRE) 2020 and PRIHATIN / available July 2020 / no deposits or collateral needed / Paid directly by SME Bank / Total RM1.6b (smebank.com.my).

 

#3. Restrategising with New Businesses and Mergers of SMEs

Key Facts

  • New SMEs which are established between 1 July, 2020 to 31 December, 2021 may enjoy income tax rebates of up to RM20,000 per year for 3 years of assessment.
  • Stamp duty exemption for SMEs on any instruments executed for Mergers and Acquisitions, from 1 July, 2020 to 30 June, 2021.
  • Businesses that need to restructure their businesses to mitigate the economic impact of the pandemic can take advantage of this opportunity. The income tax rebate can help encourage new businesses to evolve, expand capabilities and provide more job openings in the market.

What You Can Do

  1. If contemplating to start a new SME business: do your research, make a plan, consider finances, and consider an appropriate business structure.
  2. If contemplating a M&A transaction: consider strategic rationale, synergies, forms of consideration (cash, shares), accounting and tax treatment.
  3. Take advantage of benefits for setting up a new business or M&A to enjoy the income tax rebate or stamp duty exemption.

Overall

This incentive is a much welcome initiative from the government to help businesses especially SMEs to help mitigate the impact caused by the Movement Control Order (MCO) period. Businesses should take this opportunity to grow their companies and subsequently helping to nurture the economy.

 

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Do you think the PENJANA incentive will help SMEs to reduce the impact caused by Covid-19 pandemic? Share with us in the comments section below.