Going digital: Small businesses are making the leap, but there is still much to learn and innovate.
PETALING JAYA: While they may not be tech giants, the majority of small and medium enterprises (SMEs) in Malaysia have embraced digitalisation, according to industry stakeholders.
SME Association of Malaysia president Chin Chee Seong noted that despite initial resistance, most SMEs with over 10 employees have transitioned to digital platforms.
“Adoption rates for these businesses are high, at around 90-95%,” he said.
This is a significant milestone, as SMEs make up 97% of the Malaysian economy and contribute approximately 23% of the country’s gross domestic product.
According to the Statistics Department, micro, small and medium enterprises accounted for 96.9%, or 1,101,725 business establishments in Malaysia in 2023. But it is not all smooth sailing on the way to digitalisation.
“Digital transformation involves many aspects, from payment systems to customer databases,” Chin explained.
“SMEs also need to invest in cybersecurity to prevent ransomware attacks and data loss.”
He pointed out several hurdles, including high costs, poor Internet connectivity and complex technology.
Beyond financial constraints, a lack of digital knowledge and skilled talent also poses a major roadblock.
“Many traditional businesses struggle to understand and implement the necessary digital changes,” Chin said.
For micro-enterprises – such as small eateries and night market traders – advanced digital solutions may not be practical.
“For example, a nasi lemak stall may only need basic digital tools, rather than an advanced system.”
Chin urged the government to consider providing long-term support, such as multi-year grants, to ease the financial burden on SMEs.
“A three-year grant with partial funding would allow businesses to adapt gradually,” he suggested.
“It’s not just about low-interest funds; grants are necessary. There should be more precise support, with consultation, to identify the best solutions and incentives for each industry.”
Chin also called on the government to focus on developing talent and offering free consultancy to help SMEs transition.
In fact, Digital Minister Gobind Singh Deo recently announced plans for incentives to support SME digitalisation and pledged to examine why many other SMEs have yet to make the transition.
Small and Medium Enterprises Association of Malaysia (Samenta) president Datuk William Ng highlighted that many mistakenly assume digitalisation is only about costs and knowledge.
“Many small traders struggle with complex applications,” he said, cautioning against seeing digitalisation as a cure-all.
“We must abandon the mindset that digitalisation is the solution for every issue. Interventions should be needs-based, not vendor-driven.”
He pointed out that some restaurants that adopted online menu systems later reverted to manual ordering due to slow navigation on small screens.
As such, Ng warned that digitalisation grants could benefit vendors more than SMEs if there is no change in approach.
To help SMEs assess their digital progress, Samenta has developed a digitalisation grader but Ng said more support is needed.
“The government can help by channelling support through associations, rather than just vendors, ensuring the right interventions reach the right sectors at the right time,” he said.
Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) president Datuk Ng Yih Pyng said Selangor, Kuala Lumpur, Johor and Penang are leading in digital adoption among SMEs.
“These regions boast advanced digital infrastructure, a substantial pool of tech-savvy talent and a conducive business environment that fosters digital innovation.
“This doesn’t mean there is total digitalisation among all SMEs within those states. In some areas, a significant number of SMEs are still lagging in their journey.”
He cited limited technology access, a lack of awareness about digital benefits and a shortage of skilled personnel as factors in this disparity.
“Digital adoption levels can even vary across industries within each state,” he said.
Still, ACCCIM encourages SMEs to use digital solutions like online banking to streamline financial transactions and improve cash flow management.
The organisation also conducts regular surveys to gain insights into the challenges and opportunities faced by SMEs in adopting digital technologies.
Based on these findings, ACCCIM would devise targeted programmes and initiatives to help SMEs overcome hurdles and hasten their digital transformation.
He said ACCCIM had organised forums, talks and seminars to discuss digital trends, besides enabling SMEs to share their experiences.
