17 Dec 2020, Finance Matters

How Can Businesses Adapt And Bounce Back?

How Can Businesses Adapt  And Bounce Back?

It’s not an exaggeration to say that Covid-19 – and the subsequent implementation of the movement control order (MCO) and its variations – has pummelled the finances of many businesses in Malaysia. Particularly affected are the small and medium-sized enterprises (SMEs) and micro SMEs (MSMEs), both considered to be the backbone of the nation’s economy as they make up 99% of the business establishments in Malaysia1.

Despite the severity of the situation, however, it is possible for these businesses to bounce back. Here, we’ll look at a few aspects that Malaysian enterprises need to consider in order to recover from this slump: business model, business digitalisation, and finances.

Keeping The Model Updated

With the onset of the new normal, it is not surprising that consumer sentiments would change. In line with this, SMEs too must re-evaluate and decide if their existing business models can meet these new expectations of the market, as well as survive in the post-MCO and post-Covid-19 economy. Do they need to appeal to new customer segments, introduce new products that their customers are more willing to spend on, or find more effective promotional channels?

For instance, an article from Nielsen that analysed global consumption behaviour2 noted that health, safety, and quality assurance is dominating the present consumer sentiment, and will continue to remain a significant influencing factor moving forward. Consumers are likely to reassess the “value” of their purchases based not solely on the price, but also on whether the products claim to have health defence benefits. The origin of products has become an important deciding factor for consumers as well. There is an increasing preference for local brands as consumers strive to support their communities and boost the country’s economy.

With Malaysians adopting similar consumption preferences with regard to health & safety products3 and local purchases4, businesses will need to decide on how they can pivot to stay relevant to their customers.


The Dramatic Digital Shift

Aside from changing consumption preferences, Covid-19 has also altered the way people spend, driving hordes of them from offline purchases to online spending – not just in Malaysia, but across the Southeast Asia region. An analysis carried out by Bain & Company on 8,600 consumers in six Southeast Asian countries – including Malaysia – found that as 47% of consumers decreased offline purchases, 30% increased their online spending5. Not only that, roughly 83% of those shopping online said that they are likely to continue their increased spending online even after restrictions are lifted. The results from Bain & Company’s analysis also revealed the following:


With consumers largely having moved online and likely staying there post-Covid-19, it only makes sense for businesses to digitalise and tap into new opportunities. One step that SMEs and MSMEs can take is to adopt e-commerce solutions to reduce costs, as well as save time and resources6. Most e-commerce platforms will have a ready infrastructure and an available network of users that businesses can instantly tap into with a reasonable fee, thereby saving them from having to make heavy investments for the process of moving online.

Aside from digitising their business model via e-commerce solutions, SMEs and MSMEs should also consider implementing cashless payments. Even prior to the onslaught of Covid-19, there has already been a growing preference for digital payments among Malaysian consumers; 70% of Malaysians surveyed in a 2019 study by Visa said that they favour cashless payments7 for their convenience. Covid-19 and the MCO has only accelerated the process8, and it further is spurred on by government initiatives such as the E-Tunai Rakyat9 and ePENJANA programmes10.

“From the viewpoint of
businesses, digital
payments offer various
benefits as well.”

From the viewpoint of businesses, digital payments offer various benefits11 as well. Apart from reducing the risk of spreading Covid-19 through physical money, cashless payments can help merchants eliminate the need to hold on to large amounts of cash or to make constant bank visits to deposit cash. Businesses will also have a clear record of their cashflow as all transactions are logged, allowing them to better track their finances.

Meanwhile, some businesses may also need to invest in the automation or digitisation of their operations and trade channels – such as upgrading machines and software – for better service, efficiency, and profit. These businesses can tap into ongoing initiatives by the government, such as the SME Digitalisation Grant12, SME Technology Transformation Grant13, and Smart Automation Grant14.


Addressing Cashflow Needs

One of the most immediate struggles that SMEs and MSMEs faced during the implementation of MCO was the extreme cashflow issues. Within a week of the enforcement of the MCO in March, 70% of SMEs reported a 50% drop15 in business. A subsequent survey16 carried out by the SME Association of Malaysia in late April indicated that 57% of businesses reported no income during the MCO, while 40% saw their revenue drop by at least half.

Even after the government had lifted various restrictions to introduce a less stringent recovery MCO (RMCO), many enterprises continued to flounder financially. In fact, another study17 by the SME Association of Malaysia in August said that 22% of the respondents have enough cashflow to last them only for a month, whereas 27% and 31% can sustain until November and December, respectively. The remaining 20% are considering closing down their businesses for good within the next six months.

In a bid to help these entities with their finances, Bank Negara Malaysia (BNM) and the government have rolled out several financing initiatives under the PRIHATIN economic stimulus package18 and the PENJANA economic recovery plan19. Among some of the available government funds20 that SMEs and MSMEs can still apply from to help them get through this challenging period include the PENJANA SME Financing (up to RM500,000 per SME at a subsidised rate of 3.5%) and the PENJANA Microfinancing (up to RM50,000 per enterprise at a subsidised rate of 3.5%).

Apart from government funds, businesses can also look to banks for additional financing assistance. While the six-month automatic loan repayment moratorium – which ran from April until September – has now ended, banks are still ready to extend other forms of loan repayment assistance to borrowers who are truly in need21. These include flexible repayment options, rescheduling and restructuring (R&R) services, as well as different loans from the banks themselves to meet the varying needs of SMEs. Business owners are urged to reach out to their respective banks to discuss the kind of support that they can get.


Bouncing back from unprecedented challenges as severe as those caused by Covid-19 will not be easy, but with some careful planning and strategic decisions, businesses may not only survive, but also futureproof themselves. Here’s to the resilience of our local SME and MSME owners, and that they may come back stronger.

“Here’s to the resilience of our
local SME and MSME owners,
and that they may come back


The impact of COVID-19 on SME digitalisation in Malaysia, 20 October 2020.

Recalibrated Consumption Dynamics In a Covid-19 Altered World, 20 May 2020.

Adjusting Assortment is Critical As Malaysian Consumption Dynamics Shift, 2 Sept 2020

4https://ringgitplus.com/en/blog/personal-finance-news/government-urges-malaysians-to-spend-on-local-products-to-spur-economy.html Government Urges Malaysians To Spend On Local Products To Spur Economy, 21 July 2020.

How Covid-19 Is Changing Southeast Asia’s Consumers, 26 June 2020.

Struggle of Malaysian SMEs During the COVID-19 Pandemic, May 2020

Visa Study: Malaysians Expect to Increase Use Of Cashless Payments, 27 Sept 2020.

COVID-19 pandemic accelerates adoption of cashless transactions, 11 Aug 2020.

RM30 e-Tunai Rakyat E-Wallet Initiative: What You Need To Know, 13 Jan 2020.

RM50 ePenjana Credit Can Be Claimed From 31 July Via Official E-Wallet Partners Boost, Grab, & TNG eWallet, 30 July 2020.

How Sports Direct is adopting the contactless payments trend

Propelling SMEs Into the Digital World.

SME Technology Transformation Fund

Smart Automation Grant (SAG)

The impact of COVID-19 on SME digitalisation in Malaysia, 20 Oct 2020.

Half of SMEs will downsize, restructure after MCO, says survey, 7 May 2020.

SMEs still struggling with cash-flow issues, 6 Oct 2020.

Individuals And Businesses: What Covid-19 Financial Assistance Are You Eligible For?, 8 April 2020.

PENJANA Economic Recovery Plan: Highlights For Individuals And Businesses, 10 June 2020

Special Relief Facility for SMEsto meet cash flow needs

BNM: Borrowers Affected By Movement Curbs Can Still Seek Help From Banks, 23 Oct 2020.

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