Article
Everything You Need To Know About Budget 2021 - SME edition
1 Dec 2020
3 Min Read

The allocation for Budget 2021 is the largest on record for the country at RM322.5bil. The government’s effort to boost digitalisation and automation in the SME and start-up sectors can be widely seen in the various introduction of incentives and the increase in allocation of funds to assist in the migration to business digitalisation. This re-enforces the focus also previously seen in the Budget 2020.
 
Some major points for SMEs and entrepreneurs that have been proposed in the Budget 2021:

 

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

  • Entrepreneurs interested to venture into the franchising industry could seize the opportunity to participate in the above programmes under the Ministry of Domestic Trade and Consumer Affairs.
     
  • The Buy Made in Malaysia programme was launched as part of the PENJANA economic recovery plan to push consumption of local products and services. It is intended to create more visibility for Malaysian local products in hypermarkets and e-commerce platforms.

 

This could be a good reason for businesses with pre-existing licensing model to make the leap towards registering a proper franchising model, and then to on board franchisees supported by such programmes.
 

2. RM30million to be allocated through matching grants to be invested on Equity Crowd Funding platforms
 

  • In addition to the matching grant, an income tax exemption on aggregate income equals to 50% of amount invested (up to max. RM50,000) will be given to investors who invest in ECF platforms.

 

This presents a good opportunity for the public or retail investors interested in investing via ECF platforms to mitigate their downside risks inherent in equity investments, by enjoying direct savings through a reduction against their personal income tax. This tax exemption also gives company issuers another reason to raise funds via ECF platforms.
 

3. RM35million to promote Malaysian-made products and services under the Trade and Investment Mission
 

  • In the government’s effort to promote more Malaysian-made products and services, more funds have been allocated to increase trade and investment opportunities through the Malaysian Investment Development Authority.

 

This continues to encourage Malaysian businesses to produce goods in Malaysia and develop local expertise, with the view of exporting such goods and services globally.
 

4. RM50 million allocated on a matching investment basis to support peer-to-peer financing platforms (P2P)
 

  • P2P financing is an alternative financial aid under the supervision of the Securities Commission Malaysia which has generated financing in excess of RM900 million to SMEs. This matching investment will be particularly of benefit to P2P platforms who are based on invoice financing.

 

This presents opportunities to SMEs that offer competitive payment terms in their invoices to raise funds and ease pressure on their cashflows, which can be crucial in these trying economic times.
 

5. RM150 million for training programmes and sales assistance for 100,000 local entrepreneurs to encourage adoption of e-commerce under the e-Commerce SME and Micro SME Campaign.
 

  • Entrepreneurs will be provided with on-boarding training, seller subsidy and sales support to shift towards business digitalisation. Partner e-commerce platforms include but are not limited to Boost, Fave, Foodpanda, Grab, Lazada, Shopee and Zalora.

 

This is a practical step to help entrepreneurs who want to bring their offline businesses online or to start entirely new online businesses.
 

6. RM150 million to implement the Shop Malaysia Online initiative together with the e-commerce platform
 

  • Shop Malaysia Online was introduced under the PENJANA economic recovery plan as part of the government’s initiative to spur economic recovery by stimulating online consumption through e-commerce promotions and online vouchers via a public-private partnership model.
     
  • The allocation under the Budget 2021 is expected to benefit 500,000 local sellers in Malaysia.

 

This is a practical step to help entrepreneurs start e-commerce businesses.
 

7. RM150 million to the existing SME Digitalisation Grant Scheme and Smart Automation Grant
 

  • The eligibility conditions for both these grants have been relaxed to allow micro SMEs and start-ups to apply if they have been operating for at least 6 months.

 

This grant by MDEC is a continuation from the previous years, encouraging businesses to adopt automation and even artificial intelligence solutions to become more competitive, more profitable, develop new revenue streams and increase operational efficiency.
 
In a nutshell, the budget may look impressive and supportive towards SMEs, however taking into consideration that this has been a very challenging year, these initiatives by the government may help some SMEs in the short term.  

SMEs need to be ever diligent in finding new revenue generating opportunities while minimising cost as best they can until the global economy is firmly on a path to recovery.

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How much is allocated for promoting Malaysian products?
That’s right – good job!
Uh oh, that’s not quite right…
RM35 Million.
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