PETALING JAYA: SME Bank is targeting a modest financing growth of RM400mil this year, compared with RM934mil recorded in 2020 as domestic economic activities continue to slow down due to the pandemic.

       Group president and chief executive officer Aria Putera Ismail said the decline in financing growth was in line with weaker business sentiment amid prevailing uncertainties due to the Covid-19 pandemic.

       “The widespread containment measures such as the movement control order (MCO) and international border closures have prompted a weak external demand environment as well as impacting the domestic economy,” he told Bernama in an e-mail interview.

       “With the unprecedented economic crisis, Malaysia’s economy saw a worse contraction with the gross domestic product (GDP) shrinking 5.6% in 2020 compared with a positive growth of 4.3% in 2019.”

       Aria said SME Bank, which focuses on financing small and medium enterprises (SMEs), has taken a direct hit as SMEs were facing an almost 90% plunge in sales during the initial containment period. This was followed by a liquidity crisis due to extreme cash flow constraints and disruptions in supply chains, he noted.

       “Moving forward, we expect the recovery of SMEs and the Malaysian economy for this year and 2022 to be gradual. This would be supported by the easing of restrictions and improvement in global trade, coupled with the continued policy support, stimulus assistance and more importantly the success of the Covid-19 inoculation programme,” he said.

       Asked whether there is an increase in non-performing loans (NPL), Aria noted that the bank’s gross impaired ratio stood at 16% as at Dec 31, 2020.

       Taking into account the impact of the pandemic and the challenging business environment, the bank will strive its best to improve or at least maintain it at that level, he said.

       Aria said SME Bank has been carefully managing its balance sheet and asset quality throughout this unprecedented period, which has provided greater leeway for the bank to grow its business with sufficient cushion against potential risks and challenges that may lie ahead.

       “We have strategies in place to manage the impact of the MCO and shall do our best to improve our gross impaired ratio in 2021,” he said. ― Bernama