Small and Medium Enterprises (SMEs) in Malaysia had a bleak outlook during the pandemic. Many saw “no hope for recovery”, according to the country’s Small and Medium Enterprise Association.

Lockdowns and disrupted supply chains hit the world’s economy hard, but SMEs suffered more than most with their limited cash flow and reliance on brick-and-mortar operations. As the world adapts to living with the pandemic today, is hope still lost for these SMEs?

One agency is hoping to turn the tide. Rizal bin Nainy, the Chief Executive Officer of SME Corporation Malaysia (SME Corp. Malaysia), shares how they plan to help SMEs get back on their feet by encouraging digital transformation.

Promoting economic inclusion

As SME Corp. Malaysia works to help SMEs recover during the pandemic, they are conscious to ensure that no communities are left behind. Three communities, in particular, are in focus.

Their Inclusive SME Ecosystem Programme, for instance, aims to empower the bottom 40 per cent of the income pyramid. It provides this community with guidance, technical support and financial assistance to start or run microenterprises in rural areas, Rizal explains.

They do so by helping these communities adopt the use of digital technology, working with delivery and e-commerce platforms to help the bottom 40 per cent access such digital tools. As of July 2022, nearly 21,151 participants have registered and started businesses through digital platforms, whereby 6,168 participants have registered to be on board the Warongku platform, Rizal says.

Another programme encourages women to venture into business. The Women Netpreneur initiative includes business workshops that teach participants how to register for a company and run an online business. Since its inception in September 2020, the programme has trained more than 2,000 women entrepreneurs.

Youths too are a focus group for SME Corp. Malaysia. The organisation’s youth programme targets Malay and indigenous youths aged between 18 and 30 with a strong interest in entrepreneurship. A programme called Tunas Usahawan Belia Bumiputera involves an online training which exposes participants to a range of business skills such as marketing and accounting, according to its site.

SME Corp. Malaysia, through its strategic partners, also supports SMEs constrained by financial difficulties by financing the costs for working capital or equipment. All SMEs need to do is provide a valid business license and a viable business plan.

Digital transformation for SMEs

It is not easy for SMEs to embrace such digital transformation. “Many of them deem that the cost is an expense and not an investment for their business growth,” he explains.

SME Corp. Malaysia seeks to change that by providing SME owners with guidance and financial assistance. One way they are helping SMEs digitalise is by alleviating the financial burden through grants. In the country’s 2022 Budget, a total of RM400 million (~US$88 million) in grants and loans to subscribe to digitalisation, technology and innovation, Rizal shares.

SME Corp. Malaysia also supports the digitalisation of SMEs through a web portal called MyAssist MSME created to “assist SMEs in resolving their business-related issues”, says Rizal.

For instance, SMEs can use the portal to connect with larger government-linked firms, hypermarkets and other multinational corporations. This gives them the opportunity to promote their products and services to a larger audience. In just six weeks after launching, the platform has helped SMEs generate RM9.66 million (over US$200 million) of potential sales via the MatchMe portal, says Rizal.

Moving brick-and-mortar online

SMEs are the backbone of the economy, representing 97.4 per cent of overall business establishments in Malaysia in 2021. This means that any economic downturn among SMEs will inevitably affect various sectors and the country’s economic progress, Rizal says.

Malaysia’s lockdowns, which started in March 2020 and extended intermittently throughout 2021, left about 80 per cent of SMEs with only enough cash to last them for three months, he says.

One key reason why SMEs struggled during the pandemic was because of their dependence on brick-and-mortar operations. About half of SMEs relied on brick-and-mortar for their sales, Rizal says. When lockdowns hit, about 20 per cent of SMEs experienced a loss in sales of more than RM100,000 (US$22,205).

Amidst these struggles, digitalisation may shine a light. Automation and digital technology is the “best way to enable the economic growth of SMEs and micro entrepreneurs,” Rizal says.

SME Corp. Malaysia encouraged the switch to e-commerce by providing 100,000 SMEs with grants totalling to RM150 million (over US$33 million). This gave them access to training programmes, sales assistance and digital equipment, explains Rizal.

SMEs can also benefit from the Shop Malaysia Online initiative, where SME Corp. Malaysia is working with e-commerce platforms to encourage online spending. This scheme will benefit 500,000 local entrepreneurs, including those selling halal products and handicrafts.

“These initiatives exemplify the government’s commitment towards assisting the SMEs to embrace digitalisation,” Rizal says.

The future may have been bleak for SMEs during the pandemic, but all hope is not lost. With inclusive and generous financing, SME Corp. Malaysia is hoping to turn things around for the country’s local SMEs and revitalise its economy.