On 5 February 2021, Bank Negara Malaysia (‘BNM’) issued a press release announcing an additional allocation of RM2.0 billion for the Targeted Relief and Recovery Facility (‘TRRF’) and the establishment of a RM200 million Disaster Relief Facility 2021 (‘DRF’).
 
TRRF
 
The TRRF, with an initial allocation of RM2.0 billion, was first announced as the Targeted Assistance and Rehabilitation facility by the Finance Minister during the 2021 Malaysian Budget Speech. The further allocation that was just announced increases the total allocation under the TRRF to RM4.0 billion. 
 
In addition, certain key features of the TRRF have also been relaxed.
 
The salient features of the revised TRRF are as set out below.
 
Objective
 
To provide relief and support recovery for small and medium enterprises (‘SMEs’) in the services sector affected by the reintroduction of containment measures since June 2020, except for the tourism and tourism-related sub-sectors.
 
Eligibility
 
To be eligible for the facilities under the TRRF, a small and medium enterprise (‘SME’) must be in the services sector and be affected by the reintroduction of COVID-19 containment measures since June 2020 (except for tourism and tourism-related sub-sectors). Examples of the services sector are:
 

An SME must satisfy the criteria of a ‘small and medium enterprise’ laid down by the Small and Medium Enterprises Corporation Malaysia.¹ In addition, at least 51% of the shares in the SME must be held by Malaysians.
 
SMEs in the tourism and tourism-related sub-sectors are eligible to apply for assistance under the RM1.0 billion PENJANA Tourism Financing facility.²
 
When the TRRF was first launched, recipients of the Special Relief Fund and PENJANA SME Financing were not eligible for the TRRF. This restriction has now been removed and an SME that has obtained facilities under the Special Relief Fund and PENJANA SME Financing may now apply for facilities under the TRRF, subject to an aggregate limit of RM500,000 in respect of all these facilities.
 
Purpose
 
The TRRF is for working capital purposes only.
 
Financing limit
 
Up to RM500,000 for an SME and up to RM75,000 for a microenterprise.
 
Financing rate
 
Up to 3.5% p.a., inclusive of guarantee fee.
 
Guarantee coverage
 
A participating financial institution may obtain guarantee coverage for 80% of the facility made available to an SME. It may, at its option, obtain guarantee coverage for 90% of the facility made available to a microenterprise. In each case, the guarantee fee will be 0.5% p.a. of the facility amount.
 
The guarantee coverage can be obtained from the Credit Guarantee Corporation Malaysia Berhad (CGC) or Syarikat Jaminan Pembiayaan Perniagaan (SJPP).
 
Tenure
 
Up to seven years, with a moratorium on monthly instalments of at least six months.
 
Applications
 
Applications for the TRRF may be made to any of the 21 participating financial institutions listed in Appendix 1 of BNM’s press release.
 
Availability
 
Until 31 December 2021 or full utilisation (whichever is earlier).
 
DRF
 
The DRF is a new RM200 million facility launched by BNM on 5 February 2021.
 
Objective
 
The objective of the DRF is to alleviate the financial burden of SMEs affected by floods and enable them to resume their business operations.
 
Eligibility
 
Microenterprises and SMEs affected by floods in districts identified by Agensi Pengurusan Bencana Negara as flood disaster areas are eligible to apply for the DRF.
 
As in the case of the TRRF, an SME must satisfy the criteria of a ‘small and medium enterprise’ laid down by the Small and Medium Enterprises Corporation Malaysia (see above) and the requirement that at least 51% of the shares in the SME are held by Malaysians.
 
Purposes
 
The DRF may be used for:
 

 
The DRF may not be used for refinancing of existing credit or financing facilities.
 
Financing limit
 
Up to RM500,000 for an SME and up to RM75,000 for a microenterprise.
 
Financing rate
 
The maximum effective financing rate for an SME is up to 3.5% p.a. (inclusive of guarantee fee).
 
Guarantee coverage
 
A participating financial institution may obtain guarantee coverage for 80% of the facility from the Credit Guarantee Corporation Malaysia Berhad at a guarantee fee of 0.5% p.a. of the facility amount.
 
Tenure
 
Up to five years, with a moratorium period of six months on both principal and interest payments.
 
Applications
 
Affected businesses may apply for financing from participating financial institutions comprising commercial banks, Islamic banks and development financial institutions regulated by BNM.

Availability
 
Until 31 July 2021 or full utilisation (whichever is earlier).
 
Comments
 
The expansion of the funding available under the TRRF will be welcomed by microenterprises and SMEs in the services sector that are affected by the various movement control orders imposed by the Malaysian Government since June 2020 to control the Covid-19 pandemic. Further, businesses whose business assets have been damaged by the recent floods in areas identified as flood disaster areas will welcome the lifeline offered under the DRF.
 
Alert prepared by Melody Ngai (Associate) and Catherine Looi (Associate) of Skrine.
 
 

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