Are SMEs and Poverty Linked?

On September 20, 2021 Ismail Sabri told Parliament that a total of 580,000 households from the middle-income group have slipped into the bottom 40 percent (B40G category) due to the economic fallout caused by the Covid-19 pandemic.

This represents approximately 20 percent of the middle 40 percent (M40G group, which initially received a monthly income of between RM4,850 and RM10,959). The pandemic also saw the B40 group suffer a loss of income, resulting in the absolute poverty figure in Malaysia rising to 8.4 percent in 2020, compared with 5.6 percent in 2019.

This is based on data provided by the Department of Statistics Malaysia (DOSMG), which uses the current Poverty Line Income (PLIG) of RM2,208 per month.

The unemployment rate contributed to a reduction of the take-home income for those in the M40 and B40 categories.

This is the impact of SMEs shutting down. The Government still doesn’t get it. The Micro and SME sectors (MSME) accounts for 40% of the GDP and over 48% of total employment. Retail and tourism need minimum wage subsidies, up to end 2022. SMEs with more than 10 employees have bigger problems to stay afloat and meet monthly wages and rental. Never mind bank loans!

SME Association’s survey in August 2021, suggested 26% of SMEs have shut down; 34% reported business dropped by 50% (2020 vs. 2019) while 32% said turnover fell by less than 75% in May-July 2021 versus the same period in 2020.

For Budget 2022, the SMEs are looking for:

1. Wage subsidy to at least June 2022;
2. Rental subsidy up to June 2022;
3. Access to working capital to be speedier; CGC guarantees will take 3-6 months to be effective, by then businesses are closed;
4. Tax rate of 15% for first RM500,000 of taxable income would help build reserves; and
5. Sales and service tax reduced to 4% from 6%, to boost consumer demand.

The Government has to be more private sector-centric if the economy is to be revived, re-booted, or restored. What does that mean?

There has to be more dialogue, idea generation and measures that can be implemented quickly. The early “wins” are for a loan moratorium, wage and rental subsidies. Then address sector-related issues from tourism, aviation to property. Otherwise, we have the proverbial “head-in-the-sand” approach!

Source: https://smemalaysia.org

References:

Improving prospects for SMEs, Yap Leng Kuen, Starbiz, 20 September 2021

SMEs in dire need of assistance, Tan Thiam Hock, The Star, 18 September 2021

580k households slip into B40, absolute poverty rate rises to 8.4 pct – PM, Malaysiakini.com, 21 September 2021

For the first time in years, Malaysia saw a decline in SME employment in 2020,  Priya Sunil, 29 July 2021(https://www.humanresourcesonline.net)