PETALING JAYA: Limited access to financing is a significant barrier hampering Malaysian businesses’ ability to manage flood risks, said a joint report by the World Bank and Bank Negara Malaysia released today.
Floods have accounted for 85% of Malaysia’s natural disasters since 2000, and the country faces heightened flood risks due to projections indicating an increase in rainfall.
Despite that, the report, which contained a survey of 1,500 Malaysian businesses, found that there is limited understanding in Malaysia of how floods affect businesses, particularly SMEs.
Titled “Managing Flood Risks: Leveraging Finance for Business Resilience in Malaysia”, it said businesses with limited access to financial resources for flood preparedness had three times greater revenue losses associated with floods than businesses that did not.
“Although flood impacts over the past three years were more prevalent among large businesses, SMEs were 50% more likely to report financial losses than large businesses,” it said.
“SMEs were also more likely to cite indirect losses due to the impact of floods on their customers and employees.”
About 75% of small businesses stated that supply chain bottlenecks were the main cause for delays in return to operations, and the SMEs surveyed noted that insurance payouts represent an important source of funding recovery efforts.
Meanwhile, a survey of financial institutions in Malaysia (banks, insurers, and takaful operators) revealed that they face challenges in pricing, monitoring, and diversifying flood risks, partly due to marked data gaps and an inability to adequately quantify flood risks.
It noted how about 40% of banks said they do not provide any emergency support to businesses, and about 20% of banks stated that they have no products related to adaptation financing.
These factors hinder their ability to serve Malaysian businesses, especially high-risk ones, adequately, said the report.
In response, the World Bank and BNM called for complementary policy actions in several areas, with a focus on how policymakers can support and foster private sector resilience to floods.
Apart from enhancing data availability for flood risk assessments and developing a long-term strategy for risk management, it called for increased efforts by the financial sector to foster financing for adaptation, particularly targeting vulnerable SMEs.
It also proposed an expansion of the insurance market to support financial resilience, and increasing flood risk awareness and capabilities for better adaptation and resilience efforts.
Source: https://www.freemalaysiatoday.com/category/nation/2024/05/27/businesses-ability-to-manage-flood-risks-hampered-by-lack-of-financing/