Malaysia Budget 2024, Highlights for SMEs

During the unveiling of the Malaysia budget for 2024, Prime Minister Anwar Ibrahim laid out a comprehensive strategy to navigate the nation through a tumultuous period characterized by uncertainty, intricacy, and paradox, describing it as a "post-normal era." This complex scenario unfolds against the backdrop of the lingering repercussions of COVID-19 on a global scale, coupled with domestic challenges such as the escalating cost of living and the weakened state of the Ringgit.

Complementing the measures targeted at easing the burden on the average Malaysian, the Prime Minister introduced an array of plans and support programs in the latest national budget dedicated to bolstering micro, small, and medium enterprises (MSMEs). The following outlines the proposed facilities and support initiatives that MSMEs and businesses can anticipate in 2024 under the second Belanjawan Madani.

1. Compulsory Integration of E-invoicing

E-invoicing will be mandatory for businesses with revenue exceeding RM100 million, effective from 1 August 2024, instead of the initially planned June 2024 launch during Phase 1. This requirement aims to streamline record-keeping and alleviate tax compliance costs. The adjusted timeline also impacts deadlines for taxpayers in different income brackets, with full e-invoicing implementation targeted by 1 July 2025.

2. SST Increased to 8%

The scheduled uptick in the Sales and Services Tax (SST) from 6% to 8% in 2024 excludes essential services like Food & Beverage and Telecommunications, offering a temporary reprieve for consumers in those sectors. However, the broader tax landscape is set to evolve, with the government's commitment to eventually encompass services like logistics, brokerage, underwriting, and even karaoke services. This expansion hints at potential adjustments in consumer spending patterns and prompts considerations for those eyeing a home karaoke kit amid these fiscal changes.

3. MSME Financing Options

The government is poised to allocate RM44 billion for loans and financial guarantees to fortify MSMEs. A further RM2.4 billion will be set aside to extend small loan facilities to microentrepreneurs and small traders through entities such as BNM, BSN, and TEKUN. This encompasses RM1.4 billion for BSN micro-loans, RM330 million through TEKUN for diverse small traders, including a specific RM30 million for Indian community businesses. An additional RM720 million has been specifically designated to support women and youth entrepreneurs.

4. BNM-backed Funding for SMEs

BNM is rolling out a stand-alone RM8 billion loan fund to bolster SMEs, including a specific RM600 million allocation for micro-enterprises, low-income entrepreneurs, small contractors, sustainable businesses, and enterprises contributing to sectors vital for food security.

5. Amanah Ikhtiar Malaysia (AIM) Provides Capital for Small Businesses

AIM, as a microcredit organization, has actively supported approximately one million small businesses, particularly focusing on aiding single mothers and individuals with low incomes. The government is poised to inject RM100 million in funding into AIM, fortifying the organization's capacity to sustain and enhance its impactful initiatives.

6. Customized Financial Programs for Halal SMEs

As part of the Halal Industry Masterplan 2030, nine financial institutions are set to implement tailored programs for halal SMEs within a cohesive framework. This strategic move aims to provide these enterprises with dedicated funds and capacity-building initiatives. Additionally, the streamlined application process for obtaining a halal certificate will shorten the processing time from 51 days to 30 days.

7. Assurances for Bumiputera MSME Entrepreneurs

In the 2024 budget, a dedicated RM1.6 billion in loan facilities and guarantees will be allocated exclusively for Bumiputera MSME entrepreneurs. This initiative, encompassing venture capital financing for Bumiputera startups, aims to elevate the capabilities and competitiveness of these businesses.

8. Specialized Aid for Disabled Microentrepreneurs

BSN is launching a specialized financial aid program with a RM50 million budget, exclusively designed for microentrepreneurs with disabilities. This initiative reflects the government's broader commitment to ensuring the welfare and promoting self-sufficiency among persons with disabilities (OKU).

9. Extra Funding for the iTEKAD Social Finance Initiative

Facilitated by Bank Negara Malaysia (BNM), iTEKAD is a comprehensive program aiding low-income microentrepreneurs in improving financial management skills and business knowledge. It leverages social finance tools, such as donations, social impact investments, zakat, and cash waqf, alongside microfinance. The program also includes structured financial and business training. In Budget 2024, the government is set to allocate up to RM25 million in supplementary funding through matching grants with financial institutions, extending support to a larger pool of entrepreneurs.

10. SJPP's Government Guaranteed Schemes Offer Secured Financing Options

Playing a crucial role in aiding SMEs and businesses, Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) provides government-backed guarantee schemes, facilitating access to financial assistance from financial institutions. Particularly beneficial for SMEs lacking collateral, SJPP has assisted over 100,000 businesses, securing a total approved value surpassing RM75 billion. In Budget 2024, SJPP expands its support by guaranteeing up to 80% of loans, focusing on entrepreneurs in the green economy, technology, and halal sectors. A dedicated allocation of RM20 billion is set for this initiative.

11. Improvements for Digital Economy Centers (PEDi) are Underway

Each state constituency's Digital Economy Center is set to receive a dedicated RM25 million from the government to strengthen its capacity in aiding small entrepreneurs engaged in online product sales. Introduced in 2021 to promote e-commerce, these centers play a crucial role, particularly in rural areas.

12. Upgraded Capital Allowance for ICT Equipment and Computer Software

The capital allowance for expenses linked to the acquisition of information and communication technology (ICT) equipment and computer software will double from 20% to 40%. Moreover, the claiming period for companies to avail this capital allowance will be reduced from four years to three years.

13. HRD Corp Facilitates Skill Enhancement Programs

HRD Corp is set to receive RM1.6 billion for training around 1.7 million employees. Additionally, the organization will utilize 15% of the total levy collected to implement the MADANI Training Programme, benefiting MSME entrepreneurs and vulnerable groups such as ex-prisoners, the disabled, and the elderly or retirees.

14. Extension of Tunas Usahawan Belia Bumiputera Programme (TUBE)

Launched by SME Corp Malaysia in 2014, the TUBE initiative has been pivotal in fostering over 7,000 young Bumiputera entrepreneurs, creating nearly 14,000 job opportunities. This program features training workshops and a mentoring system, guiding young individuals on their journey to becoming successful entrepreneurs. Budget 2024 plans to allocate RM20 million to sustain and further develop this impactful program.

15. Evaluating a Deadline Extension for Tax Exemption Applications from Social Enterprises

To foster, assist, and champion social enterprises in Malaysia, businesses with specific social objectives like aiding refugees or environmental preservation, the government proposes extending the application period for tax exemption on their income by an additional two years, until 2025. Presently, the exemption applies to applications submitted to the Ministry of Finance between January 1, 2022, and December 31, 2023.

This diverse range of initiatives is designed to invigorate and empower SME owners and micro-entrepreneurs, acknowledged as the bedrock of the nation's economy, in 2024.