By Tengku Noor Shamsiah Tengku Abdullah
KUALA LUMPUR, Dec 5 – The RM13 billion allocation for the Sumbangan Tunai Rahmah (STR) program in Budget 2025 signals the government’s renewed focus on poverty alleviation.
However, this bold financial commitment requires equally bold reforms to unlock its full potential, according to economist Professor Geoffrey Williams, Founder and Director of Williams Business Consultancy Sdn Bhd.
“The increase shows that the government is committed to direct cash transfers as a central pillar of social protection. But without structural reform, the program’s impact will remain limited,” Prof. Williams told TNS News.
From BR1M to STR: Evolution Without Reform
STR’s roots trace back to the BR1M programme introduced in 2012. Despite its noble intentions, the program’s design flaws—such as lump-sum payments and restrictive conditions—have undermined its effectiveness in addressing long-term poverty.
“When aid is distributed sporadically, such as before elections or festive periods, it becomes a windfall. It is spent immediately, offering no real opportunity to alleviate structural poverty,” Prof. Williams explained.
Although the budget for STR has grown significantly—from RM2.5 billion in 2012 to RM13 billion in 2025—the system remains plagued by inefficiencies.
Charting a New Course for STR
Prof. Williams outlined three crucial reforms to enhance STR’s effectiveness:
- Shift to Monthly Payments: Replace lump-sum distributions with monthly disbursements. For instance, recipients eligible for the maximum aid could receive RM380 per month, creating a more reliable financial safety net.
- Direct Cash Payments: Move away from restricted MyKad-based systems and instead disburse funds directly into bank accounts, offering recipients greater flexibility.
- Universal and Individual Eligibility: Simplify the system by eliminating restrictive conditions and allocating funds individually rather than by household.
“For STR to work effectively, it must be unconditional, universally accessible, and designed to support individuals directly,” he emphasized.
The Missed Connection: Diesel Subsidy Savings
Prof. Williams also addressed the role of subsidy rationalization in funding STR, describing it as a missed opportunity.
“The diesel subsidy savings are absorbed into general government budgets, often for civil servant pay, rather than clearly channeled to social protection. Linking these savings directly to STR could make subsidy rationalization a more iconic and transparent policy,” he said.
Community Impact and Economic Ripple Effects
While STR may not significantly impact national economic growth, its benefits to local communities are undeniable.
“Low-income groups spend most of their cash aid locally, boosting small businesses and local markets. This creates immediate benefits for personal lives and communities, even if the macroeconomic effects are limited,” Prof. Williams noted.
Redefining Poverty Alleviation
Prof. Williams highlighted the importance of distinguishing between transient and structural poverty. He argued that STR, in its current form, is better suited for short-term relief rather than breaking long-term poverty cycles.
“Structural poverty requires sustained support. This includes addressing income traps, intergenerational poverty, and lack of resources for self-improvement, like retraining or education,” he said.
Addressing Dependency Myths
Concerns about dependency on cash aid programs like STR, Prof. Williams argued, are often overstated.
“Normalizing payments as monthly or weekly assistance helps recipients integrate it into their financial planning. It becomes a stable uplift, much like a wage supplement, rather than an irregular windfall,” he said.
A Call for Courageous Reform
Prof. Williams urged policymakers to embrace transparency and equity in STR implementation. He suggested leveraging tools like PADU (Pangkalan Data Utama), Malaysia’s central database and Inland Revenue Board of Malaysia (IRBM), also known as Lembaga Hasil Dalam Negeri (LHDN) to ensure accountability while minimizing resistance from entrenched interests.
“The main challenge lies in overcoming the legacy of poorly designed policies and resistance from groups that benefit from the current inefficiencies,” he explained.
A Transformative Potential
With the right reforms, STR could transcend its limitations and become a cornerstone of Malaysia’s poverty alleviation strategy.
“The government has shown a commitment to social protection with its increased allocation. Now, it must ensure that the programme is redesigned to deliver sustainable, impactful results,” Prof. Williams concluded.
TNS News