Moratorium and Targeted Bank Assistance Announcement in Malaysia
On 29 July 2020, Malaysia’s Prime Minister announced the advanced moratorium and targeted bank assistance. Specifically, the loan repayment moratorium was introduced to reduce the financial burden of the people. It was also implemented to address the cash flow challenges faced by businesses, especially in the early and mid-phases of the implementation of the Movement Control Order or PKP.
These are among the steps taken by the government under the People’s Concerned Economic Stimulus Plan or PRIHATIN. The plan’s goal was to protect the people, support business and strengthen the economy.
Since it was launched on April 1, the loan repayment moratorium has helped the people and businesses to some extent. Especially with the cessation of almost all economic activities. The plan attempted to combat the spread of the COVID-19 epidemic.
According to data from Bank Negara Malaysia, as of July 20, 2020, more than 7.7 million individual borrowers or 93% of all borrowers have benefited from the moratorium on loan repayments worth RM38.3 billion. During the same period, a total of 243,000 SMEs or 95% of the total SME borrowers benefited from this moratorium with a value of RM20.7 billion.
Since the gradual opening of the economy in May and later during the Restoration PKP period, economic activity across the country is slowly recovering. Now, there are individuals and businesses that can afford to repay their loans. The number of individual borrowers who continue to repay loan instalments and no longer rely on the moratorium facility has increased from 331,000 borrowers in April, to 601,000 borrowers in July 2020.
Meanwhile, for the same period, the number of SME borrowers who chose not to take this facility has increased from 5,000 to 13,000 borrowers. However, there are still sectors of the economy that are facing difficult and uncertain conditions. There are businesses that have not been able to operate fully and there are brothers and sisters who have lost their jobs and sources of income.
The moratorium is set to end on 30 September. As such, the Minister of Finance and the Governor of Bank Negara has agreed to implement a Moratorium Extension and Targeted Bank Assistance that is more focused specifically on those who really need it, namely:
- For those who lost their jobs by 2020 and still have not found a new job. They will enjoy an extended moratorium targeted for a period of 3 months. After 3 months, the moratorium period can be extended by the banks depending on their individual situation.
- For those who are still working but their salaries are affected or reduced due to COVID-19. The monthly instalment payment will be reduced in line with the salary reduction rate, depending on the type of loan. For example, for a home loan or personal loan, the monthly instalment payment will be reduced at the same rate as the salary reduction. This assistance is for a period of at least 6 months and an extension can be given subject to the current salary situation.
Additionally, banks have made a commitment to assist all individual borrowers or SMEs who are also affected by COVID-19. This includes traders, hawkers or the self-employed. Depending on the situation of the borrowers, the assistance offered includes either one of the following:
- Pay interest only for a specified period
- Extend the entire loan term to reduce monthly repayments
- Provide other relief until the borrower achieves a more stable financial position.
As for hire purchase loans, the bank will also offer appropriate instalment scheduling options subject to the Hire Purchase Act. For example, extending the repayment period at a lower monthly instalment rate.
For example, extending the repayment period at a lower monthly instalment rate.
These measures are expected to benefit 3 million individuals and SMEs. If more people need help, banking institutions have made a commitment to consider appropriate assistance. Therefore, eligible borrowers can contact their respective banks to apply from 7 August 2020.
The government hopes the Moratorium and Targeted Bank Assistance will be able to alleviate the burden of those affected by economic problems due to the COVID-19 pandemic. The decisions made by this government in collaboration with banking institutions are expected to support business sustainability, assist in the recovery and revitalize the country’s economy.