While the Covid-19 outbreak may have brought a damaging onslaught of economic disruptions to small and medium enterprises (SMEs), it may have also paved the way for digital transformation as businesses change their operations to cope with office closures, restricted movement and supply interruption.
Indeed, it is often in times of crisis that these kinds of seismic shifts take place. As SMEs look to survive in this challenging business environment, companies everywhere have been pushed into an accelerated state of digitalisation, whether they like it or not.
“Most SMEs are simply unprepared to deal with a pandemic of this scale. However, it’s often during a crisis that SMEs will start looking for alternative ways to keep their businesses running. Now is the best time for them to embrace Industrial Revolution 4.0 (IR4.0) and start their digital transformation journey,” says CIMB Group’s CEO of Group Commercial Banking Victor Lee Meng Teck.
Although shops have started to reopen with loosened restrictions under the Recovery Movement Control Order (RMCO), doing business physically is still challenging. Everyone is forced to learn new ways of dealing with customers and understand the rules of social distancing.
In the new normal, Lee says, retail businesses can place less reliance on brick-and-mortar stores and leverage burgeoning e-commerce platforms. On top of that, SMEs need to embrace digitalisation for their business operations, including electronic point-of-sale systems (e-POS), enterprise resource planning (ERP) and electronic payroll systems, he adds.
“Taking advantage of this, the crisis presents an opportunity for SMEs to forge a digital business strategy. Many e-commerce websites have recorded a spike in customers and orders, and are doing relatively well in this period,” Lee says.
“The trend towards digital is being accelerated by the pandemic. By being active digitally, SMEs are also able to strengthen relationships with existing customers, and build more trust with mutual support while they explore and leverage new partnerships,” he adds.
With this in mind, Lee says, CIMB Bank and its SME partners have created value-added services specifically to help SMEs build their businesses online. For instance, CIMB Bank has partnered with e-commerce provider Shopmatic to help Malaysian SMEs build and scale up their businesses in the e-commerce space.
The initiative is part of the group’s new three-pronged SME business proposition to provide its customers with a complete suite of financing and business solutions. These solutions comprise SME Financing (for no-collateral and business property financing), SME Transact (cash management services) and SME Partners (for services such as operations and logistics, e-commerce and digital connectivity as well as HR solutions soon).
With this partnership, SMEs in Malaysia stand to benefit from Shopmatic’s services, including setting up an e-commerce site complete with a secure payment gateway and guidance on the necessary technical know-how in starting and running an online business.
“With Shopmatic, we are able to provide our SME customers with a platform to readily set up their businesses online in less than 30 minutes and, with the crisis, we are offering a 30% discount on all subscription packages,” Lee says.
Besides that, CIMB has launched the Digital Retail Package, powered by Exabytes and Billplz. CIMB’s SME customers can enjoy discounts of up to 50% off Exabytes’ normal prices, enabling them to launch their online store at just RM58.25 per month for a year.
“For digital payment solutions, our SME customers are given a two-month standard membership fee waiver for its payment form under Billplz. Armed with this product, merchants can instantly start selling on main social media and chatting platforms such as Facebook, WhatsApp and Instagram, taking advantage of its secure features,” Lee explains.
Lee says CIMB is working closely with key stakeholders and industry players to enable SMEs to transform their business. In this respect, there is a credit facility catering for SMEs that wish to digitise and automate their business for increased productivity and profitability.
“Banks provide lending for SMEs to grow and in the current situation, such measures not only help SMEs to survive and sustain during this period, but to rebuild or reinvent their business and allow them to return to their business operations,” he says.
As business sustainability remains the key focus, now would be the time for SME customers to work closely with their financial institutions to manage their cash flows. Lee says this is especially crucial during times of crisis to ensure that the company’s financial liquidity remains strong and intact.
According to Lee, financial institutions are constantly looking for ways to assist SMEs, especially in the current situation. He says SMEs can seek assistance to tide over their business operations in the next few months, until they are ready to stand firmly on their feet again.
In fact, he says CIMB Bank is working on providing a new relief fund through the newly introduced Syarikat Jaminan Pembiayaan Perniagaan (SJPP) Guarantee scheme or the Government Guarantee Scheme Covid-19 (GGS Prihatin).
“This allows us to continue our support for SMEs that require recapitalisation due to the negative impact of the Covid-19 outbreak,” Lee says.
SMEs: Backbone of the economy
SMEs are an important component of the economy, making up 98.5% of business entities in Malaysia. In 2018, SMEs contributed 38.3% to the country’s gross domestic product and accounted for 66.2% of the workforce and 17.3% of exports, according to SME Corp Malaysia’s 2018/19 Annual Report.
“We recognise that SMEs are the backbone of our country and we have seen the wide-ranging impact of the Covid-19 pandemic. CIMB continues to extend unwavering support, especially in these tough times, through our Financial and Non-Financial Relief Assistance Programme, for SMEs. To date, we have approved almost RM700 million for the Special Relief Facility (SRF) and an additional RM500 million of our own allocation to support the businesses,” Lee says.
But, of course, this comes with a set of challenges for the financial institutions as well. It is worth noting that while 98.5% of the country’s business entities comprise SMEs, only 2.3% of these are medium-sized SMEs and 21.2% are small SMEs. The remaining 76.5% are micro SMEs or businesses that are less than three years old and are in the nascent stages of growth.
As such, this poses challenges in terms of credit risk as these companies present a bigger non-performing loan (NPL) risk given their infancy and lack of financial stability.
“It is with this target segment in mind that CIMB has crafted SME-specific loans, such as micro financing loans, that will help decrease the burden on SMEs during this crucial period. CIMB’s internal risk management frameworks help to manage credit risk and loan defaults. We have to strike a balance in order to protect the bank and the economy while also ensuring that all SMEs receive the financial support to grow,” Lee says.
“There is no telling how long the pandemic will last, but CIMB is doing all it can to assist businesses through this difficult period. This pandemic certainly has shown banks the importance of digitising their business and building new distribution channels to serve their customers. CIMB will continue to explore new partnerships that can help us meet the challenges faced by the industry,” he adds.
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