In a rapidly evolving business landscape, SMEs in Malaysia find themselves grappling with a triple challenge that hinders their growth and potential. These challenges encompass the struggle to secure capital from financial institutions, the urgent need to embrace digitalisation, and the persistent inequality women entrepreneurs face in accessing funding.
Despite these obstacles, small, and medium enterprises (SMEs) have proven to be a formidable force, achieving a remarkable Gross Domestic Product (GDP) growth of 11.6% in 2022 – surpassing the national GDP growth of 8.7%, as reported by the Department of Statistics Malaysia (DoSM). This impressive performance underscores the crucial role that SMEs play in driving economic growth, innovation, and job creation.
However, to sustain and build upon this success, it is imperative to address the challenges that hinder SMEs’ progress, ensuring they have the necessary support and resources to thrive in an increasingly competitive global landscape.
Many SMEs often find it challenging to secure startup capital from lending institutions
According to research conducted by Funding Society, it has been revealed that. approximately 70% of SMEs rely on their own savings and the financial support of family and friends as their primary source of seed money. Traditional banks, which have long been considered a go-to option for funding, only provided financial assistance to a mere 23% of SMEs.
Furthermore, a meagre 7% of SMEs turned to alternative funding sources such as FinTech companies. The research also highlights that SMEs in Malaysia have the weakest access to traditional bank financing, with only 17% able to secure funds, and a mere 3% able to obtain financing from alternative lenders. Consequently, SMEs in Malaysia heavily rely on personal savings, accounting for 66% of their funding, along with support from family and friends, contributing to 13% of their financial backing.
The government has shown a keen ear to the needs of SMEs looking to kick-start their businesses. Recognising the importance of fueling various ventures, including hawkers, small businesses, batik craft operators, Orang Asli entrepreneurs, and Bumiputera businesses, they have allocated a substantial RM1.4 billion from BSN microloans.
Link: https://www.bsn.com.my/BusinessBanking/Products/microplus-i-pkbc
Additionally, the government has designated RM330 million under Tekun to finance these sectors. Notably, there is a specific allocation of RM30 million set aside for businesses led by the Indian community, which serves as a testament to the government’s unwavering commitment to uplift marginalised groups and support the entrepreneurial aspirations of SMEs across Malaysia.
Bank Negara Malaysia has taken decisive action by providing RM8 billion in support, alongside an additional RM600 million, to assist micro-enterprises, low-income entrepreneurs, small contractors, and the food security sectors. This significant financial injection demonstrates the central bank’s commitment to bolstering these crucial sectors and ensuring their resilience in economic challenges.
By providing targeted assistance, Bank Negara Malaysia aims to empower and uplift these key segments of the economy, fostering sustainable growth and promoting financial inclusivity.
Link: https://www.bnm.gov.my/funds4SME
Limited budget in the digitalisation journey
Research conducted by PayPal has shown that 40% of SMEs face limitations when it comes to budget allocation for digitalisation. This finding highlights the challenges faced by small and medium-sized enterprises in embracing digital technologies to enhance their operations and expand their reach.
Recognising the challenges faced by SMEs due to limited budgets for digitalisation, the government has taken proactive measures to address this pain point. In an effort to support SMEs in adapting to the digital age, the government has allocated RM2.2 billion specifically for automating business processes, digitalising operations, and expanding global footprints.
Notably, a standout feature of this initiative is the RM100 million digitisation grant, designed to benefit over 20,000 SMEs by providing grants of up to RM5,000. This financial support aims to enhance the competitiveness of SMEs despite limited budgets for digitalisation. Moreover, Bank Negara Malaysia (BNM) has supported automation and digitisation by providing RM900 million in loan funds.
These measures demonstrate the government’s understanding of the pain points faced by SMEs and their commitment to assisting them in overcoming budget constraints and embracing digital transformation for long-term success and growth.
Several challenges have affected women’s entrepreneurship journey
One of the primary obstacles impacting the performance of women entrepreneurs in Malaysia’s SMEs is the emphasis on individual characteristics. Additionally, inadequate family support, limited access to loans and finance, gender inequality, and a lack of mentorship further contribute to these challenges.
In acknowledgement of the significant contributions made by women entrepreneurs, a substantial amount of RM720 million has been allocated to provide support and encouragement for their innovative initiatives. This financial allocation aims to empower and uplift these entrepreneurs, recognising their valuable role in driving economic growth and fostering a vibrant entrepreneurial ecosystem.
If you are interested in applying for the Madani digital grant worth a maximum of RM5,000, you may refer here.
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