- Drop in demand and delay in receivables were top two challenges
A survey conducted by Maybank involving its SME customers has revealed that 67% of the respondents have successfully leveraged digital technology into their sales platform during the Movement Control Order (MCO) 3.0. The survey respondents made up 84% of Maybank’s borrowing SME customers.
MCOs and social distancing measures have steered SMEs to re-organise their business models, moving their operations online in order to remain in business and overcome disruptions in supply chains. The SMEs have also ventured into various social media platforms such as Telegram, WhatsApp, Facebook, Instagram and numerous e-commerce marketplaces.
Nevertheless, despite opportunities offered by digital technologies, the survey shows that the remaining 33% of SMEs were unable to adopt digital technology due to factors such as the nature of their businesses not being suitable for online platforms, lack of technical knowledge, high cost of implementation, unsuccessful attempts in using digital platforms, highly competitive line of business, lack of awareness about digital solutions offered in the market, and the refusal to use digital solutions.
The survey also revealed that during MCO 3.0, SMEs experienced diverse business challenges as a result of the large-scale economic disruptions. The challenges ranked by order include a drop in demand (34%), a delay in receivables (31%), a shortage or delay in obtaining supplies (18%), adapting to new operations and processes (11%) and insufficient workforce (6%).
In terms of impact to sales during MCO 3.0, 61% of respondents experienced a decrease in sales, 25% saw sales remain unchanged while 14% reported better sales due to their agility in business strategy and quick response to market needs.
This Maybank survey undertaken in September and October 2021, which was part of a broader exercise undertaken for non-retail and corporate customers in Malaysia, was conducted to fully understand how MCO 3.0 has impacted SME customers in 5 categories – financial, technology, business, supply chain and people. At the same time, it aimed to enable the Group to gauge the financial health of these customers and identify any additional assistance that could be rendered to them.
On the issue of workforce management, some 80% of SMEs said they did not undertake any retrenchment mainly due to a lean business set up, and that they intended to retain their existing skilled and experienced workforce who are critical in supporting their business continuity. Around 72% of the respondents did not exercise salary cuts while the 28% which did mainly cited shorter operating hours as the reason.
The survey also found that 99.6% of the respondents were still operating, although 21.2% had to temporarily close during MCO 3.0, while only 0.4% had permanently ceased operations. Some 61% reported having cash flow which could sustain them for more than 7 months should MCO 3.0 continue, while around 24% could sustain themselves between 4-6 months and 15% only for 3 months or less. While 97% of respondents indicated that they were able to continue with their repayment obligations, either as per their obligations pre-pandemic or under new terms emplaced from repayment assistance programmes, 37% of these respondents will be monitored closely for potential vulnerabilities or challenges they might experience in meeting repayment obligations.
In general, the Maybank survey responses imply that our SME customers experienced a squeeze on cash margins and for some, it had a negative impact due to a drop in demand or a delay in receivables or supplies. For many of the survey respondents, they also experienced an increase in their operating cost. As such, the assistance required by these customers would vary from additional equity capital to working capital lines, of which some may require credit support. Also, the ability to help these SMEs transition their business onto a digital platform would assist in helping them reduce their operating cost and expanding their market reach and client base.
Group CEO, Community Financial Services Maybank, Dato’ John Chong said “As we continue to support our customers through our financial solutions, the Group simultaneously initiated the Maybank SME survey with the intention to analyse and resolve the pressure points faced by them. Since SMEs are the nation’s economic backbone, employing almost half the workforce and contributing close to 40% of Malaysia’s Gross Domestic Product, it is critical that we render appropriate assistance – not only through financing but also other areas such as enhancing their digital presence, operational efficiency and so on.”
“Maybank has the capabilities in these areas such as through our digital payments and Sama-Sama Lokal platforms, as well as online Biz apps and financing capabilities which can boost SME businesses with minimal or no cost,” he added. “Now that we have granular data from our survey, we will offer our SMEs the appropriate help to leverage the opening up of the economy and to meet the pent-up demand that is expected to emerge in the coming months.”
Dato’ John said the Bank continues to assist SME customers by extending additional loans to support their growth momentum and providing fast access to loans by leveraging Credit Guarantee Corporation and Syarikat Jaminan Pembiayaan Perniagaan’s guarantees as well as by offering digital solutions. For customers who are unable to pay their commitments, he indicated that the Bank could assist in leveraging Government Aided Funds to extend loans, as well as provide other financial alternatives and digital solutions.
For this survey, the main respondents are from sectors such as wholesale and retail trade, real estate, manufacturing and construction.
Maybank currently serves almost 60% of all SMEs in the country. During the start of the pandemic in April 2020, Maybank developed Sama-Sama Lokal, a zero commission online marketplace within just a few weeks after hearing about the struggles of neighbourhood local hawkers and small businesses, who are mostly Microenterprises, facing the potential need to close their businesses due to reduced sales amidst the low physical footfall. More recently, Maybank introduced Maybank2u Biz app to make life easier for SMEs by offering banking and business management servic es all in one platform. M ain features inc lude the user’s ability to track the company’s assets via a simple interface, export transactional data to be used with other thirdparty accounting software, approve transactions and grant approvals on-the-go for up to 10 transactions at one time and an in-built invoicing tool, to help the SME manage its receivables and cash flow better.