With the increasing number of cases due to the Covid-19 pandemic, the Malaysian Prime Minister had to announce the Movement Control Order (“MCO”) from 18 March to 31 March throughout the nation and this MCO had later been announced to be extended to 14 April 2020.

Scenario 1
Here is a conversation between Encik ICMS and Mak Cik Kiah after watching the news:
Encik ICMS: “How is everything on your side?”
Mak Cik Kiah: “MCO is affecting my life, I watch my bank account depleting. With no proper income streams, I don’t think I can repay my loans and I might have to exhaust all my savings.”

As such, it is blatantly clear that all the Malaysians including Mak Cik Kiah are expected to face with severe economic issues in the upcoming months. To tackle one of the critical issues, to wit, loan repayments, the Central Bank of Malaysia (“Central Bank”) has taken a bold step forward to implement an additional measure, to wit, the Loan Deferment package [ https://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=5018&lang=en ](or interchangeably used as “Moratorium”) pursuant to the latest circular issued by the Central Bank to provide the relevant guidelines pertaining to the Loan Deferment package. The following paragraphs are aimed to expound the relevant measure.

Who is entitled to Moratorium?
Any individuals including Mak Cik Kiah, Small-to-Medium Enterprises, (“SMEs[ SMEs definition by SME Corp, with at least 51% shares held by Malaysians.]”) and companies (“Target Groups”) are entitled to Moratorium. The objective behind this initiative is to assist the Target Groups to ease their short-term cash flow burden and to keep things afloat in this critical period. The borrowers from the Target groups may temporarily defer the repayment of their existing loans for up to a period of six (6) months commencing from 1 April 2020 to 30 September 2020 (“Moratorium”) without any imposition of a late payment penalty. Another benefit of Moratorium is that such loan deferments will not trigger you to be red-flagged under the Central Credit Reference Information System (“CCRIS”).

What if I do not want to defer my loans?
Since Moratorium is an automatic opt-in approach used for individuals and SMEs, you must inform your respective banking institutions of your intentions to opt-out if you do not intend to defer your loan repayments. Nevertheless, the Moratorium is not an automatic approach used for the corporates, and thus necessitating an application if they intend to defer their loans.

What are the prerequisites to be entitled to Moratorium?
One of the prerequisites to be entitled to the Loan Deferment package is that such loans must not be in default for more than 90 days as of 1st April 2020, and the loans must be denominated in our currency, to wit, Malaysian Ringgit. Such Moratorium is applicable for personal loans and car loans takers as well but it is not applicable for credit card loans takers. (Note: Central Bank has another offer wherein credit card balances can be converted into a term loan of not more than three (3) years at an interest rate not exceeding 13% per annum)

Do I have to pay the interests accrued on the deferred loan?
Nevertheless, one must be aware that he or she still have to honour the interests and profits that would be accrued due to the deferred loan repayments unless the deferred loan is an Islamic Loan. (Note: as the interest rates may vary from one bank to another, thus you are advised to refer to your banking institutions)

Scenario 2
Mak Cik Kiah asks:
“If I take a conventional loan with a bank, its loan amount is RM1,000,000 and its interest rate is 12.7% per annum, how much would my interest be?”
Encik ICMS answers:
“An interest rate of 12.7% per annum would translate to approximately 1% per month.
Hence, your interest during the first month is RM 10,000. If you decide to defer your loan, you owe the bank RM1,010,000 by the end of the first month (including your principal loan amount and interest accrued).
During the second month, the interest is now calculated on RM1,010,000, thus the interest for the 2nd month is RM10,100. Your outstanding amount with the bank is now RM1,020,100.
During the third month, the same principle of compounding interest applies. Another amount of RM10,201 which is the interest would be added to your outstanding amount with the bank.
Your total loan amount would be RM1,061,520.15 at the end of the sixth month.”

For further explanation, kindly refer to Table 1 below:

Key Takeaway
Can you imagine the power of compounding interest? All in all, one must exercise reasonable prudence while considering the Loan Deferment package as it is patently not a waiver. You are still accountable to pay for the loans as well as its additional six months of interest accrued. Nevertheless, we would still like to applaud our Central Bank for offering these reliefs as well as many banks which include but not limited to Maybank, CIMB Bank, OCBC Bank, Public Bank, RHB Bank and Standard Charted Bank to waive the compounded interests accrued on the deferred loans.

Scenario 3
Leonardo (Youngest son of Mak Cik Kiah): “Mummy, do you know that our government is also announcing any other Economic Stimulation Package?”
Mak Cik Kiah: “Yes, I am aware, I can withdraw RM500 per month from my second account in Employees Provident Fund (“EPF”)[ https://www.kwsp.gov.my/-/epf-to-allow-account-2-withdrawals-under-i-lestari]. Also, we are one of the M40 families, I can apply for Bantuan Prihatin National (“BPN”) financial aid for our family. If our application is successful, we can most likely get RM1,000 as our household income is around RM4,001 to RM8,000. Also, the government provides discounts for our electric bills ranging from 15% to 50% for a duration of 6 months starting from April 2020.”
Leonardo: “Yay! Good news! By the way I think our neighbour is a B40 family. I guess their household income should be lesser than RM4,000. I am a little bit concerned for their situation.”
Mak Cik Kiah: “Don’t worry. The government would allocate RM1,600 for their family.”
Leonardo: “Is there any aid allocated for a student like me?”
Mak Cik Kiah: “Yes, of course. RM200 for all the students in higher institutions.”
Alyssa (The only daughter of Mak Cik Kiah): “Mummy, what about me? I celebrated my 21st birthday in last year and started working but my salary is lesser than RM2,000 per month.”
Mak Cik Kiah: “You can get RM800!”
Kobe (Eldest son of Mak Cik Kiah): “Mummy, I want to apply too! I earn more than RM2,001 but less than RM4,000 per month.”
Mak Cik Kiah: “Not too bad, you can get RM500.”

For further explanation, kindly refer to Table 2 below:

How to apply for BPN Financial Aid?
1. Those who are recipients of the Bantuan Sara Hidup (“BSH”) aid and registered taxpayers with Lembaga Hasil Dalam Negeri (“LHDN”) are not required to apply. Malaysians will be notified via Short Message Service (“SMS”) or email regarding your eligibility for the BPN financial aid, starting in stages from 1 April. If you have received that SMS or email, you do not have to carry out any further checks regarding your eligibility with LHDN.
2. Nonetheless, if you are not registered with BSH or LHDN, you can make a new application on the official LHDN website between 1 April and 30 April 2020. If you meet the eligibility requirements but are not marked as “eligible” while you check on the LHDN website, you can make an online appeal between 3 April and 30 April 2020, such appeal could be done on the LHDN website.
3. If you are uncertain about your eligibility status for the BPN financial aid, you can check your status online on the LHDN website too.

As far as we are concerned, our government has allocated a total amount of RM250 million for the Economic Stimulus Package. One may ponder, how did the government find a large amount of money? Experts say that only an estimated amount of RM22 billions is coming from the government money while up to 90% of the allocation of fund for Economic Stimulus Package is coming from our taxpayers’ money and common people in many forms, including EPF and Loan Deferment Packages. Essentially, loan deferment is a temporary relief and eventually, you have to repay the debts.

Besides, the measure of allowing withdrawal from the second account of EPF also clearly shows that such amount of withdrawal belongs to our hard-earned portion of retirement fund, instead of the government. Furthermore, we are allowed to defer our contributions to the EPF and Human Resource Development Berhad or Human Resource Development Fund for a total duration of six (6) months while the loan takers of Perbadanan Tanggung Pendidikan Tinggi Nasional (“PTPTN”) are allowed to defer their payment of loans as well. Again, these estimated amount of allocations for deferment are eventually our money as we are required to repay due in the near future.

All of these financial assistances are not forever but only offered once in a blue moon. Many people would start having job security issues or business continuity issues. On the other hand, the graduating students would eventually step into the real world. What we have devoted the best year of our lives to build is now being threatened by an invincible enemy and the very survival of our life is at stake.

To cope with the potential financial distress, one is advised to start saving your emergency funds for at least six months and to upskill and reskill as the current circumstances may transpire to the New Normal soon. Covid-19 pushes us to break through the boundaries but also reminds us to go back to the basics where health is of supreme importance in life. In a nutshell, you have to be financially healthy, mentally healthy and most importantly, nutritionally healthy. Otherwise, as the old saying goes, “Veni, Vidi, Vici”, the Corona Virus would be the ultimate winner. It came, it saw and it conquered.
As our Prime Minister says, “no one is left behind”, a lot of us may not make it through this storm in the beginning, but we will be lending our hands, helping each other and giving our all till the end even when we can no longer hold the ford. I believe, together we will prevail!

Written by:
Wong Kar Ling (a former Director of the ICMS-MY Council Policy & Strategy Division in 2019/2020 and currently a Constitutional/Ethics Director in Alumni Network Committee)
She has the passion in law and is now having her pupillage (a legal trainee programme) in a law firm. She always believes that the knowledge is the life of the mind and loves to share her knowledge with others. She also aspires to build the community together with her peers.

Photo by Hello I’m Nik on Unsplash.