Businesses face greater financial stress but loan impairment ratios remain low, stable

Banks have reported a higher share of business loans with increased credit risks at 13.9%, compared with 11.5% in 2019, indicating signs of businesses facing greater financial stress.

“The outlook for business credit risks will however continue to be highly dependent on the pace and strength of economic recovery,“ Bank Negara Malaysia said in its Financial Stability Review – First Half 2020 . The lower level of digitalisation among SMEs has constrained their ability to pivot to e-commerce platforms to sustain business activity, particularly during the early phase of the MCO.

“While larger issuances of government bonds going forward could see some crowding out of corporate funding in the debt market, the majority of corporate bonds maturing this year continue to be highly-rated, further mitigating refinancing risks.”

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