SMEs and Gig Economy to bear the brunt of MCO

SMEs and Gig Economy to bear the brunt of MCO

The IT inductry is facing a difficult situation currently for businesses and employees, but it is particularly challenging for small and medium enterprises (SMEs) and those in the gig economy. While most of these smaller businesses and self-employed individuals would agree that the Movement Control Order (MCO) is necessary to stem the spread of Covid-19 in the country, but they cannot help but be concerned should it be extended beyond two weeks.

An owner of an engineering outfit that works on a project basis mentioned that his 20-man SME company will be fine working from home for two weeks of MCO. However, he expresses his concern that if MCO is extended for a longer period of time, meeting our staff salaries at the end of the month is an issue.

SMEs represent 98.5% of companies in Malaysia. In its 2018 annual report, Bank Negara Malaysia said there were about one million such establishments in the country. In terms of contribution to the economy, SMEs accounted for 38.3% of Malaysia’s gross domestic product (GDP) in 2018, or in value terms, over RM500 billion. A large portion of the SMEs, or 62%, are in the services sector. Any worsening of the Covid-19 situation and extension of the MCO would have a severe impact on them, and the economy.

SME Association of Malaysia president Datuk Micheal Kang believes that if the MCO is prolonged beyond a certain period and little or no help is given to the sector, there could be over one million job losses in the SME industry alone. The government announced measures to help SMEs. It will provide financial assistance — in the form of loan facilities and rescheduling and restructuring of payments — to help these businesses maintain their operations, continue to employ workers and encourage domestic investments.

Banks have also announced relief measures to support affected customers. A former bank CEO highlights that the many of the local banks hardly service the micro SMEs, except for development banks. In recent times, micro SMEs have turned to peer-to-peer lending platforms to raise funds

While the fear of an extended MCO is real, small businesses are hoping that the government can lend more support. One of their main grouses — which is being hotly debated — is that they are not allowed to put their employees on unpaid leave during this period.

Sourced from here.