KUALA LUMPUR, Nov 6  -- Small and medium enterprises (SMEs) form a vital component of the Malaysian economy, but the COVID-19 pandemic has exposed underlying problems in the way SMEs conduct their business.

However, the government’s timely intervention through PRIHATIN and PRIHATIN SME is expected to help SMEs to survive in the current challenging business environment, the Ministry of Finance (MoF) said in its Economic Outlook 2021 report released today.

The pandemic has also created a new normal in business practices, which includes adopting digital business models, re-orienting supply chains and embracing the shift in consumer behaviours.

Therefore, it is vital to ensure the sustainability and resilience of SMEs at all times, the ministry said.

This can be done through the implementation of initiatives such as accelerating digitalisation, adopting strategic financial planning and enhancing branding capabilities.

The MoF said digital adoption is necessary to transform SMEs to be more competitive and resilient.

 “Digitalisation helps businesses better understand their customers, gauge the effectiveness of marketing campaigns, increase the efficiency of their business operations, transform products and empower employees,” it said.

 Various studies confirmed that adopting strategic financial planning would improve the SMEs’ business performance and success rate.

 Citing a survey conducted by Bank Negara Malaysia, the ministry said that more than 70 per cent of SMEs’ financing needs are sourced internally or from personal savings, while the rest are obtained from banks as well as development financial and microcredit institutions.

The MoF said currently, local SMEs account for only 18 per cent of total exports due to lack of knowledge on market access and readiness in exporting.

 “There is a need for SMEs to adopt cost-effective methods through technology-oriented approaches to commercialise their products,” it said.

SMEs account for 98.5 per cent of total establishments in the country, mainly in the services sector.

 -- BERNAMA