Rising business sentiment among SMEs: what to expect

Sanjiv Razdan, Global Head of SME Business, Instarem

Sentiment among small and medium-sized enterprises (SMEs) in Singapore and Malaysia has been largely positive since the global COVID-19 pandemic began. In Singapore, firms are looking beyond survival to seize new opportunities, according to a survey compiled by the Singapore Business Federation (SBF) and Experian.

Similarly, Malaysian food and beverage outlets have also reportedly welcomed the lockdown that started in May, as they were among those who had made earlier calls to contain the spread of the virus. However, businesses are still pleading for more assistance from the government to help them survive the current circumstances.

With this rise in business sentiment among SMEs, it is timely to consider the opportunities and challenges surrounding this positive outlook, and how technology plays a role in helping small businesses succeed in a post-pandemic era.

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The Necessary Boost in Confidence

This current confidence boost is mainly due to improvements across turnover, profitability, business expansion, capital investment, hiring, capacity utilisation, and access to financing. SMEs can now look forward to continuing projects that were kept on hold when the pandemic started.

Over a year ago, businesses faced a collective scramble to navigate internal and external disruptions. Today, while SMEs remain cautious in the near term, many are keeping an eye on future business opportunities. They can now shift their resources to invest in emerging technologies or infrastructure to enable remote working at scale, or prioritise employee wellbeing to retain and attract talent.

We can also expect the shift in focus to business growth, including seeing more expansions, strategic partnerships, mergers and acquisitions in the Southeast Asian region. For example, in Malaysia, optimism from SMEs resulted in 33% of companies looking to increase their headcount, according to Michael Page Malaysia’s Talent Trends 2021 Report.

Despite these opportunities, it is important to understand some key challenges that SMEs still face. In the survey done by SBF and Experian, SMEs are expecting an easing of their access to financing for the first time since late 2019.

This sentiment, however, came with an expectation that there will be easing of business restrictions in the coming months. In reality, Malaysia’s now extended Movement Control Order (MCO 3.0) for instance, could prove as a momentary setback to the overall economic recovery.

Will Positive Sentiments Among SMEs Last?

In the last few months, we have been seeing a trend of partial and gradual recovery. Overall, while SMEs appear to be relaxing their ‘wait-and-see’ approach, it is hard to predict whether this wave of positivity will be short- or long-lived. It is safe to say, however, that it depends on several external and internal factors.

From an external lens, aspects such as in-market developments of COVID-19, government grants and schemes to provide funding support for SMEs and, of course, which industry we are looking at must be taken into account. Businesses in the travel and hospitality industries took a hard hit, for example, while others in the digital space, like Fintech, gaming, e-learning and e-commerce saw a rise in sales and adoption.

It also depends largely on internal factors, which all comes down to whether or not a business has the necessary processes or infrastructure in place to navigate future waves of disruption. For example, securing loans or credit has never been easy for SMEs – the absence of a stable and profitable portfolio is seen as a drawback by banks and financial institutions.

Even before the pandemic, 61% of Singaporean SMEs held low credit standings, and not more than 15% of SMEs in fast-growing economies had access to the credit they required. The additional delays in payments induced by the pandemic have only aggravated this lack of capital. Maximising cash flow has been – and will continue to be – a top priority for SMEs to navigate future waves of uncertainty, and this starts by strengthening their financial infrastructure and resources.

Modernising Payments Within Businesses

During the pandemic, digital payments are increasing in popularity, rewarding businesses for meeting the demands of technologically advanced customers and pushing laggards to modernise to stay afloat and remain competitive.

Many aspects of cross-border payments are still quite complex, requiring several banking licences, compliance, and layers of technology to enable SMEs to send funds across multiple geographical regions and currencies.

Incorporating improved payment methods unlocks new revenue opportunities within the business and streamlines complexities by eliminating manual processes between sending and receiving parties, whether working with credit services, loans, savings, foreign exchange, wealth management advice, or automatic payments.

Over the past couple of years, SMEs have been consistently facing dark clouds and silver linings, all in an effort to stay afloat. With the increase in positive business sentiment, many are riding this wave to explore and invest in newer aspects such as digitalisation, upskilling or, even the shift in focus to health and mental wellbeing. What remains important – despite current sentiment, outlook or economic recovery – is for SMEs to boost their overall resiliency towards unexpected shocks by focusing on business growth and strengthening their existing infrastructure for the long run.