Concerns About Loan Defaults And Moratorium

The COVID-19 pandemic is a constant threat to businesses, and despite the gradual relaxation of SOPs, many firms are in desperate need of support.

While some companies are doing well, others are not in a good shape and this could be because of a lack of experience to deal with a pandemic situation or lack of capital.

It is in such times that people have to be innovative but not everyone can innovate, much less take advantage of the chaos in a creative way.

Last month, Business Today published some articles about the current economic situation, and the challenges restaurants are experiencing while some observers gave us some clues on the loan moratorium in place since July.

The month of August ended with business associations and businessmen sounding the alarm, saying the threat of loan default is real in Malaysia, and the problem will become more pertinent as the country gradually opens up.

We also hear how the pandemic and the various lockdowns have resulted in significant cash constraints for businesses. 

In the meantime, banks are coming out with statements showing business is as usual for the banking industry. 

But, even if the banking figures are not reflecting the reality on the ground, it is felt intensely by some companies and individuals.

The question that we have to ask is what happens after the moratorium ends?

Some analysts say economic recovery may continue to suffer long after the easing of lockdowns.

Some companies are cash-trapped and do not have any avenues to look at for supplies or funding. Their businesses were laid to waste for months and this means they will not qualify for loans and aid packages.

Most individuals are also experiencing pay reductions, with no means of knowing when they will get back their full pay.

For laid-off workers, the cash-strapped firms are not expanding fast enough to provide them with new possibilities.

Restaurants, on the other hand, are facing different challenges. Even though they are open, customers are not frequenting the eateries for dining-in. 

They are frightened about the epidemic and are taking away food, says Datuk Jawahar Ali, President of the Persatuan Pengusaha Restauran Muslim Malaysia.

On the property front, Business Today has learned that there is another crisis just waiting to burst. That is the prospect of banking agencies repossessing properties. 

Dr Daniele Gambero, strategic marketing consultant for property developers with REI Group of Companies and President of Malaysian Proptech Association based his evaluation on the constraints experienced by some homeowners on the realities on the ground.

He foresees a sharp rise in foreclosures and auctions of properties in the 6 to 12 months.

According to him, homeowners will be defaulting and bringing banks to foreclose their properties and bring these properties on sale for auctions.

Meanwhile, banks are profiting greatly from the epidemic and the numerous moratoriums, churning out revenues from interest gained.

At least, this is the popular belief, and the assumption is that banks aren’t assisting their clients but rather taking advantage of loan moratoriums in particular.

This article appeared in Business Today

Kazi Mahmood

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