PETALING JAYA: Abdul Mukthahir M. Ibrahim is worried. He has discovered that an increasingly large number of Muslim restaurant owners have turned to illegal loan syndicates to get quick cash.
“It’s not a good idea. But what to do? Yes, I know Ah Longs charge very high interest but what can we do?” said Mukthahir, who is vice-president of the Malaysian Muslim Restaurant Owners Association.
“I have about 4,500 members operating 12,000 restaurants all over Malaysia. From seven branches, they cut down to five. From five, they reduced to three. But still, they need to turn to Ah Longs.”
He said his members borrow between RM100,000 and RM200,000 from Ah Longs; they are afraid to borrow more. They just need a bit to help over the short term of a few months, he said.
Garry Chua of the Malaysian Retail Chain Association (MRCA) said he knows of other retailers who have turned to illegal loan syndicates for help. He foresees a lot more retailers will face closure because of the cash crunch.
In today’s Covid-19 environment, cash is indeed king. Where to source it is another matter.
Mukthahir said: “We are asking the government to give us soft loans with low interest, not via the banks because they will want to see past year’s profits. And we are not asking a lot. Just RM100,000 to RM200,000.”
He said banks “do not want to take the risk” with restaurant owners or retailers in general. “I do not blame them. They want the past year’s profit figures and other documents. My members do not have them. We only had losses last year,” he said.
Chua, who heads MRCA’s food and beverage sector, hopes that restaurants will be allowed to serve dine-in customers who are fully vaccinated. “There is no other way for us except for allowing dine-ins.”
From the amount they have borrowed, one can deduce that retailers, most of whom are SMEs (small and medium-sized enterprises), need emergency funding to tie them over for about a year or so, he said.
This was further underscored by a recent RM200 million deal between Sunway group, RHB banking group and Credit Guarantee Corporation Malaysia Bhd for tenants in seven Sunway malls.
Qualified retailers got RM500,000 with an overdraft option at competitive interest rates, Sunway Malls & Theme Park CEO HC Chan said.
The loan agreement solves two problems: the mall operator’s need for tenants to remain while awaiting an economic turnaround, and the tenants’ need for fresh capital.
Chan said: “They need help to tide them over for the next six to 12 months, or they will go under. Most retailers would have exhausted their reserves and savings by now. Fresh and timely capital injection is important, and urgent.“
Chan said Sunway Malls was the first to give rent relief in March last year.
The new deal comes at a time when Klang Valley retailers, unable to get financing from traditional banks, are turning to non-traditional funding avenues.
Peer-to-peer financing solutions provider CapBay, which serves small and medium-scale industries said inquiries have spiked during the pandemic.
CapBay co-founder and CEO Ang Xing Xian told FMT that enquiries were also coming from wholesale and retail trades, Ang said.
They turn to P2P because approval is faster, within one to two weeks, simpler and can be done digitally, he said.
Since the MCO 1.0 in March 2020, average financing requests from SMEs is at RM187,000, which is about the amount sought by Thahir’s association members.
Interest rates are higher than normal bank financing, he said.
Another industry source said the RM200,000 sought by most retailers suggests they need funds to tide them over for six months or thereabouts.