Malaysian small businesses increase use of digital technologies due to Covid-19

• 40% of surveyed small businesses increased their focus on online sales
• 70% of businesses surveyed expect their revenue to grow in 2021

Malaysian small businesses made greater use of digital technologies in response to Covid-19, with 40% increasing their focus on online sales in the past 12 months. This finding comes from a new regional small business survey by global professional accounting organisation CPA Australia.

E-commerce wasn’t the only digital technology used by small business during Covid-19. Social media was also an important tool for the sector, with over 60% using it to promote their business and 55% using it to communicate with customers.

“The strong connection between technology usage and business growth and the quick returns many Malaysian businesses experience when investing in technology is no doubt helping to drive this uptake. 42% reported positive returns from their technology investment last year,” said Jimmy Lai (pic, right), president of CPA Australia’s Malaysia Division.

While most Malaysian small businesses offer customers new digital and mobile payment options, 61.5% still receive 50% or more of their sales in cash, above the regional average of 46.4%.

“Small businesses may be offering limited digital and mobile payment options due to a lack of understanding about what’s available or scepticism towards these solutions. This echoes findings from CPA Australia’s 2020 Report on Business FinTech Usage Survey, that showed 31% of businesses with fewer than 50 employees identified a lack of fintech understanding among the board or senior management as a challenge to fintech adoption.

“More can be done to assure business that digital and mobile payment options can provide better customer reach, which should contribute to recovery this year,” Lai added.

Difficult financing conditions look likely to remain a concern for many Malaysian small businesses this year, with nearly 50% expecting they will face problems accessing finance. These difficulties, plus an uncertain outlook are also expected to impact the solvency of many businesses, with 32% anticipating it will be difficult to repay debts in 2021.

Covid-19 is likely to continue creating challenges for Malaysia’s small businesses. Developments such as the spike in infections at the start of the year are balanced by the vaccine roll-out and easing of restrictions. This suggest a more positive picture for 2021, which is supported by the survey results. About 70% of respondents expect their revenue to grow this year, up from 56% last year. Exporting will make an important contribution to growth, with 45% expecting revenue from overseas to grow this year.

Despite the uncertainty many businesses face, over a quarter of Malaysia’s small businesses expect to innovate this year. This is a higher result than for small businesses in Australia, Hong Kong, New Zealand, Singapore and Taiwan.  

“With many small businesses having a strong focus on innovation, e-commerce, good staff and improving business strategy, we are likely to see them recover quickly from Covid-19, especially in the second half of the year. Such a focus also sets them up for long-term growth.

“However, uncertainty in the economic outlook will remain an impediment to small business recovery. The government should therefore continue to play its enhanced role in supporting this fundamental sector of Malaysia’s economy in the near term,” concluded Lai.

CPA Australia’s 12^th annual Asia-Pacific Small Business Survey can be found here.                                 

Business and economic growth

2020 was a weaker year for Malaysia’s small businesses than 2019. 51.0 per cent grew last year, down from the 67.7 per cent that grew in 2019. The result was better than fellow ASEAN member Singapore (where 35.5 per cent grew), but lower than Vietnam (63.2 per cent), the Philippines (61.7 per cent) and Indonesia (57.5 per cent).

2021 is expected to be a better year for Malaysia’s small businesses. 66.6 per cent of businesses expect to grow, which is higher than the survey average of 60.8 per cent.

There are many positive aspects of the results from Malaysia. Many small businesses have characteristics strongly associated with growth, including a focus on:

• innovation
• e-commerce
• good staff
• improved business strategy.

We are therefore likely to see Malaysia’s small businesses recover quickly from COVID-19 and grow in the second half of 2021 and beyond.

Impacts of COVID-19

Like all markets, Malaysian small businesses considered COVID-19 their biggest challenge in 2020. 66.9 per cent selected it as their biggest barrier to growth, the third highest result amongst the markets surveyed. COVID-19 is expected to continue to create challenges for Malaysia’s small businesses in 2021. Only 31.5 per cent have recovered or expect to recover from the negative impacts of the pandemic in 2021, below the survey average of 39.0 per cent.

Use of technology

One factor driving growth of Malaysia’s small business is their relatively strong use of digital technologies. Selling online is becoming increasingly important for Malaysia’s small businesses. 63.9 per cent earned more than ten per cent of their revenue from online sales in 2020, up from 47.5 per cent in 2019.

COVID-19 acted as a catalyst for the increase in online sales. 40.4 per cent of Malaysian small businesses began or increased their focus on online sales as a major reaction to COVID-19 – the second highest result of the markets surveyed.

Further, an overwhelming majority of Malaysia’s small businesses use social media. Only 10.6 per cent do not use social media in their business. 61.3 per cent use it to promote their business to potential customers.

Most of Malaysia’s small businesses offer customers the choice of paying by new digital and mobile payment technologies to customers, such as Alipay, PayPal and iPay88. 52.5 per cent received more than 10 per cent of their sales through such technology, which is however below the survey average of 64.2 per cent.

Cash however remains a very important payment option for Malaysia’s small businesses. 61.6 per cent stated that it made up 50 per cent or more of their sales in 2020, well above the survey average of 46.4 per cent. Given the broad cross-section of industries represented in Malaysia’s survey sample, it is assumed that many business-to-business transactions are done in cash.

Malaysia’s small businesses have a relatively strong focus on cybersecurity. 44.4 per cent reviewed their cybersecurity measures in the past six months, while 46.7 per cent expected their business will be cyberattacked in 2021.

Helping to drive this focus on technology are the strong returns such investments are generating. 42.4 per cent of Malaysia’s small businesses that invested in technology in 2020 reported such investments were already been profitable.

Business activity over the past 12 months

Planned business activity over the next 12 months

Innovation

Malaysia’s small businesses continue to have a reasonable focus on innovation, particularly in comparison to small businesses from Australia, Hong Kong, New Zealand, Singapore and Taiwan. 26.5 per cent will introduce a totally new product, process or service to Malaysia or the world in 2021. This innovative culture should support long-term growth and improve the competitiveness of Malaysia’s small businesses.

Jobs

Reflecting a challenging 2020, only 15.6 per cent of Malaysian small businesses added to their employee numbers.

However, a more positive business outlook is reflected in expected jobs growth. 41.1 per cent of Malaysian small businesses expect to increase their employee numbers next year, which is above the survey average of 36.1 per cent..

Access to finance

Most Malaysian small businesses required external finance in 2020. 54.6 per cent sought external finance last year, up slightly from 52.7 per cent in 2019. However, reflecting difficult trading conditions, 45.5 per cent sought finance for business survival, compared with 25.3 per cent in 2019.

Respondents from Malaysia found accessing finance challenging. Only 13.9 per cent finding it easy or very easy to access, the second lowest of the markets surveyed.

Factors that had positive and negative influences on business

^ equal third

^ equal third

Small businesses in Malaysia found that ‘increasing costs’ was the second most likely barrier to growth in 2020. Utilities and materials were the costs that caused them the most detriment last year.

Demographics

ABOUT THE SURVEY

The CPA Australia Asia-Pacific Small Business Survey 2020-21 is part of a longitudinal annual study of small business across the region conducted by CPA Australia since 2009. This report presents a cross-market comparison between the eleven markets surveyed and, where applicable, a comparison of results from 2009. The survey was conducted between 9 November and 10 December 2020.

Interview method

In each market, the online survey was conducted amongst a random sample of small business owners/senior managers. The sample was obtained through online panel provider Dynata and their Asian panel partner iPanel Online and AIP Corporation. To qualify for the survey, participants were required to be an owner, a senior manager or a qualified accountant of a business with less than 20 employees.

Sample

4227 participants completed the survey, including 507 from Australia, 779 from Mainland China, 306 from Hong Kong, 512 from India, 301 from Indonesia, 302 from Malaysia, 300 from New Zealand, 300 from the Philippines, 307 from Singapore, 303 from Taiwan and 310 from Vietnam.

Questioning

The questions were largely drawn from previous surveys. Several questions and options relating to COVID-19 were added to this survey. 

The questionnaire for Malaysia was administered in both English and Bahasa Malaysia