Danajamin refining rules for RM50b financing

by NUR HANANI AZMAN/ graphic by MZUKRI

DANAJAMIN Nasional Bhd is expected to complete the application and approval rules under the government-backed RM50 billion financial scheme as many large companies struggle to avoid financial ruin due to the coronavirus pandemic.

The government had announced an allocation of RM50 billion under Danajamin Prihatin Guarantee Scheme, a key part of Putrajaya’s landmark RM250 billion stimulus package.

Danajamin said it is currently in the process of refining the operational parameters with the relevant stakeholders and the information will be announced once the process has been completed.

“It will be completed in time for companies to submit their applications from May 1 to Dec 31, 2020,” Danajamin said in an email reply to The Malaysian Reserve (TMR).

The RM50 billion scheme comes with guaranteed 80% coverage to assist large companies as working capital. This facility is intended for viable businesses from all sectors that face difficulties due to the Covid-19 pandemic.

Under the Prihatin Rakyat economic stimulus package, the guarantee scheme will be managed and subject to credit evaluation by Danajamin.

Danajamin said the minimum guaranteed loan size is RM20 million for each business.

This facility will be available for application from May 1 to Dec 31, 2020, or until the full-security deposit is used.

“We will be updating our website further with more details on how to apply for this guarantee scheme,” it said.

The pandemic, which has topped over 3,000 infections in the country, had forced the government to impose the Movement Control Order (MCO) for the last 21 days, resulting in many companies losing tens of millions in revenues.

Airlines, hotels, most manufacturing activities, as well as tourism-related businesses like amusement parks and resorts, have been battered due to the MCO. Each of these large companies employ hundreds of people and require huge operating capital.

The government yesterday announced a RM10 billion additional assistance solely for small and medium enterprises (SMEs). This segment, which employs millions of people, is likely to shutter without government assistance, leaving hundreds of thousands of workers jobless.

Malaysia is bracing for a recession this year due to the pandemic, which has killed more than 70,000 people worldwide. Over one million people have been infected and millions more yet to be detected.

Malaysia’s economy can contract as much as -2% this year, according to the central bank’s recent forecast. The World Bank’s lower case scenario puts Malaysia’s GDP this year at -4.6%.

Recession worries have been widely accepted. Last week, Moody’s Investors Service Inc downgraded its outlook on Malaysia’s banking system to ‘Negative’ from ‘Stable’, to reflect growing risks from the Covid-19 pandemic.

“Malaysian banks’ asset quality will deteriorate, driven by impairments of loans to export-oriented manufacturers and companies in the leisure, tourism, hospitality and aviation sectors because of the challenges stemming from coronavirus-related disruption,” it said in a report.

Malaysia’s electronic exports and tourism, in particular, will be hit, while political uncertainty will weigh on business and investor sentiments, Moody’s said.

Malaysian Entrepreneurs Foundation chairman Nitesh Malani said the implications will be tremendously felt by SMEs.

“This move is much required, but has not come with compensation and solutions for businesses and SMEs in mind.

“Employees and employers are being left to figure things out and panic has hit the streets. This will surely be a long cycle to recovery,” he said.