SMEs continue to face low business margins and cash flow limitations despite a general
recovery in business. As a result, 29 percent of SMEs who took part in a survey organised
by the Small and Medium Enterprises Association (SAMENTA) indicated they have less than two months of cash reserves, despite reporting an increase of 60 percent in revenue.

The SAMENTA Mid-Year Survey took place in September, with over 500 SMEs representing
SMEs of all sizes and industries taking part. SAMENTA is the country’s oldest and largest
association for SMEs.

On top of low business margins, SMEs are also reporting difficulty in securing financing, with 35 percent of respondents indicating that they could not secure any financing because of limited collateral, the complex application process, high interest rates, and a lack of credit history.

Datuk William Ng, national president of SAMENTA said that the number one challenge for
SMEs is low business margin due to the continued reliance on manpower, rising costs of raw material, and lack of automation.

“This in turn hurts productivity and profitability. Our SMEs need urgent intervention to help to move up the value chain and focus on activities that will add value and raise productivity.

“The incessant band-aid in the form of grants will only exacerbate the situation, as SMEs find ourselves becoming even more dependent on aid as our margins shrink,” Ng said.

Challenges aplenty for SMES

Besides low margins and cash flow limitations, the SAMENTA Mid-Year Survey has also
reaffirmed that the main challenges for SMEs are high input costs, weak domestic demand,
a weak ringgit, shortage of skilled workers, and increased regulatory enforcement.

Unsurprisingly, important issues such as ESG and the recently ratified RCEP and CPTPP
are low in the priority list of SMEs, as they struggle to survive.

“One of the urgent changes needed is a revision of the definition of SMEs. RM50 million and RM20 million respectively for manufacturers and services sectors are far too low. A
manufacturer doing RM100 million in business is likely to face exactly the same challenges
as one who’s at RM50 million. For comparison, in Singapore, an SME is any business with revenue below S$100 million,” Ng said.

“When we raise that bar and understand that we are out to build SMEs that are both independent and competitive, instead of dishing out band-aids to small traders, we will be focusing our resources on helping our SMEs raise their standards.

“The focus must be on helping our SMEs move up the value chain, so that we don’t have to keep firefighting the symptoms like labour shortage, rising material costs and market disruptions,” he added.

The association is also appealing to the government to keep or even lower the Overnight
Policy Rate in view of the weak ringgit and to take more drastic measures to improve the
economy and boost investors’ confidence.

“We must not give in to political expediency and avoid politically sensitive decisions such as
the reintroduction of a broad-based consumption tax, the reform and rationalisation of
subsidies and pensions, and plugging inefficiencies in government expenditures.

“More must also be done to boost the disposable income of middle-income Malaysians, to stimulate greater domestic spending,” Ng said. “This is a cry of help from the SMEs. We cannot, must not, ignore this, given how our SMEs have answered the call of the government again and again in increasing the minimum wages and in retaining employees during the pandemic.”


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