Budget 2021: What’s In It For SMEs, Startups, E-Commerce?

Category: Budgets & Tax,SME

Budget 2021 brings hope to small and medium enterprises (SMEs), startups and businesses in Malaysia that are affected by the COVID-19 pandemic. Read this article to find out the key highlights and benefits that your business can expect to get from the latest national budget.



Many businesses, particularly small and medium-sized enterprises (SMEs) have been on the ropes since the COVID-19 outbreak.

According to Entrepreneur Development and Cooperatives Minister Wan Junaidi Tuanku Jaafar, who was citing statistics from the Companies Commission of Malaysia, more than 30,000 SMEs have closed shop since the movement control order (MCO) was implemented in March.

From that figure, about 9,675 SMEs ceased operations during the first phase of the MCO from 18 March to 9 June, and 22,794 during the recovery MCO (RMCO) phase from June to September.

The sluggish economic outlook is also evident by the fact that many individual borrowers and microenterprises have requested for repayment assistance. As of 9 October, more than half a million applications for repayment assistance have been received by Bank Negara Malaysia (BNM). 

Banking institutions have also facilitated requests for repayment assistance of close to 480,000 individuals and 34,400 SMEs in COVID-19-affected sectors, according to Bank Negara’s latest Financial Stability Review report for the first half of 2020.

Beyond the dramatic loss of human life and unprecedented challenges to our public health systems, it’s clear that the pandemic has also severely tested the livelihood of many local businesses.

But the recently-announced Budget 2021 does offer several benefits that could aid the SMEs as well as boost the e-commerce and digital scenes in the country.

Related: Budget 2021: Here Are The Key Highlights And Takeaways For You

In this article, we take a closer look at the different initiatives and benefits that SMEs and e-commerce startups can tap on in order to sustain their business in these challenging economic times.

1. Enhanced targeted loan repayment assistance

Microenterprises, as defined by SME Corp, with loans of up to RM150,000 may get assistance through the enhanced Targeted Repayment Assistance (TRA) programme, and can request to either:

  • Defer monthly instalments for three months; or
  • Reduce monthly instalments by 50% for six months.


The assistance will be extended for loan facilities that were approved before 1 October 2020 which are not in arrears for more than 90 days at the time a borrower requests for repayment assistance.

The other good news is additional documentation from borrowers is not required by banks to obtain repayment assistance. However, for hire purchase loans and fixed rate Islamic financing, borrowers would need to sign new agreements in accordance with the Hire Purchase Act 1967 and Shariah requirements.

The repayment enhancement will be available for instalments due in December 2020 onwards, and will take effect at the next instalment following a borrower’s request and confirmation.

These additional repayment assistance will be available to eligible borrowers between 23 November 2020 and 30 June 2021.

Some financial institutions such as Bank Islam, Maybank and OCBC have recently announced that they are ready to receive applications for targeted loan repayment assistance.

If you wish to request for assistance you may contact your bank through its customer service hotlines, online banking, or by visiting your bank’s branch to confirm the repayment options.

2. Financial aid to support Bumiputeras, women and other entrepreneurs

The government has introduced different initiatives to aid entrepreneurs from all backgrounds,

To boost and empower Bumiputera entrepreneurs, a total of RM4.6 billion will be channelled for the following purposes:

  • RM510 million to finance Bumiputera SMEs and micro SMEs through TEKUN Nasional and Perbadanan Usahawan Nasional Berhad (PUNB). TEKUN is a financial services agency for micro and small entrepreneurs under the Ministry of Agriculture & Agro-based Industry. PUNB was established to enhance the participation and involvement of Bumiputera in entrepreneurship in the country.

  • RM800 million for capacity building programmes by Bank Pembangunan Malaysia and SME Bank.

  • RM2 billion to assist the financing of Bumiputera SMEs through Syarikat Jaminan Pembiayaan Perniagaan (SJPP).

  • RM1.3 billion for various capacity building programmes, including professional development, Dana Kemakmuran Bumiputera as well as programmes or projects specifically for Bumiputeras.


To empower women entrepreneurs, the government has allocated RM95 million for special micro credit that will be financed through TEKUN, Majlis Amanah Rakyat (MARA) and Agrobank. MARA is responsible for developing, encouraging, facilitating and fostering economic and social development, particularly in rural areas. Another RM50 million will also be offered to female entrepreneurs to support them via Ar-Rahnu BizNita, a programme parked under the Islamic Economic Development Foundation (YaPEIM).

Additionally, more than 2,000 women entrepreneurs can benefit from guidance courses via the Micro Entrepreneur Business Development programme (BizMe). This programme will focus on matters such as marketing strategies, packaging and labelling, and the technical guidance of businesses.

In addition, TEKUN will provide RM20 million specifically for the Skim Pembangunan Usahawan Masyarakat India (SPUMI) and RM5 million for entrepreneurship development of other minority communities.

3. Enhance access to financing aid

The fourth strategy under Budget 2021, the government has provided close to RM1.9 billion of soft loan funds and grants via PRIHATIN and PENJANA packages to help SMEs and micro-SME entrepreneurs facing difficulties accessing financing aid.

This initiative will be carried out through several other measures:

Measure 1: Micro Credit Financing


SME Bank will provide the Lestari Bumi financing facility scheme (funds amounting to RM300 million) to encourage Bumiputera micro and small businesses to transform to a higher category.

The government will also introduce Jana Niaga, a national supply chain finance platform to assist the financial position of SMEs that supply to the government or GLCs. It also aims to benefit SMEs who have cash flow problems due to the long invoice payment period as well as help them secure loans from financial institutions.

The Jana Niaga platform will be led by EXIM Bank with the involvement of several financial institutions, and will be implemented together with Petronas and Telekom Malaysia. Up to RM300 million will be provided by EXIM Bank to drive Jana Niaga.

Businesses can also leverage on peer-to-peer financing (P2P) under the supervision of the Securities Commission Malaysia (SC) as one of the alternatives to get financing. This financial innovation has generated financing, in excess of RM900 million, to aid SMEs, according to the government.

“To support P2P platforms, especially those based on invoice financing, RM50 million will be allocated based on a matching investments basis,” said Finance Minister Tengku Dato Sri Zafrul Aziz.

In addition, micro credit financing worth nearly RM1.2 billion will be provided through TEKUN, PUNB, Agrobank, BSN and other financial institutions, including RM110 million to the Micro Enterprises Facility under BNM to encourage entrepreneurship among gig workers and the self-employed as well as to support the iTEKAD programme.

Launched in May 2020, the iTEKAD programme combines micro and social financing to empower micro entrepreneurs from the B40 segment to generate sustainable income and contribute to society. The programme will be expanded to additional financial institutions and collaborate with more state religious authorities and delivery partners in 2021.

Lastly, the government will also allocate RM230 million through PUNB as financing for SMEs. Businesses can tap into this resource for working capital, upgrading of automation systems and equipment, and expenditure related to the implementation of COVID-19 SOP compliance.

Measure 2: Loan Guarantees


The government will provide an additional RM10 billion for government guarantee schemes via Syarikat Jaminan Pembiayaan Perniagaan (SJPP); RM2 billion will be reserved specifically for bumiputera entrepreneurs. This is on top of the RM25 billion that has already been allocated for this initiative thus far.

2021 budget government guarantee scheme for smes
Lack of collateral affects SMEs’ access to funding from their financial institutions. SJPP allows SMEs to overcome this barrier by providing government guarantee schemes as an alternative solution to their collateral requirements. (Image source: Syarikat Jaminan Pembiayaan Perniagaan (SJPP))

Essentially, government guarantee schemes are alternative financing solutions for eligible SMEs to obtain credit facilities from participating banks, with the government acting as a guarantor. GGS-Prihatin, is one of the financing schemes introduced by the government and guaranteed by SJPP to provide relief assistance to SMEs adversely affected by the COVID-19 outbreak.

Other schemes include the PENJANA Tourism Financing (PTF), Special Relief Facility Scheme (SRF), SME Automation and Digitalisation Facility Scheme (ADF) and Agrofood Facility Scheme (AF). All are available from SJPP’s participating financial institutions. Applications are open until 31 December 2020, or until fully utilised, whichever is earlier. Check out their website if you need more information.

These schemes typically provide a guarantee coverage of up to 80%, but the facilities obtained can only be used for working capital or capital expenditure.

Measure 3: Alternative Financing


Lastly, to encourage take-up, the government is also offering an income tax exemption of 50% of the investment amount or limited to RM50,000 for individual investors to take part in Equity Crowdfunding (ECF), an alternative financing method, especially for technology start-ups.

The government is also allocating RM30 million through matching grants to be invested on ECF platforms under the supervision of the SC.

Related: Budget 2021: Analysing The Measures Through A Personal Finance Lense

4. Targeted assistance and rehabilitation facility

Targeted Assistance and Rehabilitation Facility, under Bank Negara Malaysia (BNM). It will be introduced via loans from banking institutions.

5. Driving investments into the country to boost local businesses

To help local companies face future challenges, the government will act as a facilitator in providing access to investment funds, including improving the business scene in the country.

One of the measures aimed at executing this goal includes encouraging the production and purchase of locally made products.

The following are some of the SME-focused initiatives:

  • RM25 million for the Micro Franchise Development and Affordable Franchise programmes as well as Buy Made in Malaysia programme.

  • RM50 million to be channeled into training programmes, sales assistance and digital equipment for 100,000 local entrepreneurs to encourage adoption of e-commerce under the e-Commerce SME and Micro SME Campaign.

  • RM150 million to implement the Shop Malaysia Online initiative alongside e-commerce platforms to encourage online spending, which aims to benefit 500,000 local sellers including the halal products and handicrafts entrepreneurs.

  • RM35 million to promote Malaysian-made products and services under the Trade and Investment Mission.

6. Strengthening key sectors to aid entrepreneurs

The agriculture sector is key to the country’s development. According to the government, it contributed 7.1% to the country’s GDP in 2019.

While other economic sectors contracted as a result of the COVID-19 pandemic, the agriculture sector is projected to grow at 4.7% of GDP next year, according to the government.

Therefore, to further boost this sector, the government is allocating RM1 million at a rate of 3.5% for a period of 10 years under the Agrofood Value Chain Modernization programme to aid agricultural entrepreneurs to procure equipment and technology based on IR4.0. Agrobank will provide RM60 million for this purpose.

The government is also helping micro entrepreneurs through the implementation of an Aquaculture Development programme with an allocation of RM10 million through matching grants of up to RM20,000 for micro entrepreneurs to buy equipment to develop high-value aquaculture livestock.

7. Prioritising automation and digitalisation to boost startups

The government will focus on long-term productivity through the use of new technology to accelerate the country’s transformation towards becoming a high-income economy.

The government has allocated RM1 billion, through Bank Pembangunan Malaysia Berhad (BPMB) to drive the Industrial Digitalization Transformation Scheme which aims to boost digitalization activities. The availability of these funds will be extended until 31 December 2023.

In addition, to support automation and modernisation, additional funds amounting to RM150 million will be provided under the SME Digitalization Grant Scheme and the Automation Grant. The eligibility for these grants has also been relaxed for micro SMEs and start-ups that have been operating for at least six months.

8. Exemption from Human Resources Development Fund (HRDF) levies

Companies that are still affected by the pandemic are exempted from paying the HRDF levies for six months, starting from 1 January 2021. This exemption also covers the tourism sector.

If you didn’t already know, the HRDF mandatory levy payment is collected by the HRDF from employers in certain industries, with the goal of providing employee training for the Malaysian workforce.

The rate of your company’s HRDF levy can either be 0.5% or 1% of the monthly wages of each employee, depending on the size of your company’s workforce.

If you are interested in more Budget 2021 content, then stay tuned as we tap into to other related analysis or insights as part of the #Budget2021 series.