MSMEs and the MSME Digitalisation Grant

MSMEs have a key role to play in developing economies. They provide jobs, contribute to economic growth and help build local communities. However, they face many challenges. Some of these include access to finance, business continuity, capacity and skills. One way to address these challenges is through digitization. This will enable them to expand their customer base, be more resilient and improve operational efficiency. However, there are a number of barriers that need to be overcome before digitization can be adopted by MSMEs.

Among the barriers is the cost of setting up the required technology MSME digitalisation grant infrastructure. This can be prohibitive for small businesses especially when the return on investment is not yet visible. Also, MSMEs may lack the technical knowhow to implement a digital solution. Further, they might not understand the value proposition of a digital system as well as their need to integrate it with existing processes.

To address these barriers, the Government launched the MSME digitalisation grant. The grant provides 50% matching grants to SMEs who want to implement and scale up their digitalisation initiatives. The Ministry of Finance (MOF) announced the fund during its 2020 Budget speech.

The initiative is part of the government’s efforts to boost digitalisation in Malaysia and encourage cashless transactions. It follows the success of the Shop Malaysia Online programme, which has seen more than 200,000 local entrepreneurs increase their sales on e-commerce platforms last year, worth more than RM1.8 billion.

Digitalisation has the potential to reduce barriers to financing for MSMEs. For example, MSMEs typically have poor credit histories which prevent them from accessing formal banking facilities. As a result, they rely on informal sources of funding like friends and family or exploitative money lenders. By providing a digital credit profile, which can be verified by financial service providers, MSMEs can gain greater access to finance.

Additionally, digitisation can enable MSMEs to scale up their operations by providing them with the ability to process more transactions at a lower cost. This can help them compete more effectively with larger companies that are already digitalised. It can also enhance their market reach and customer satisfaction by making them more accessible to customers.

MSMEs need to be empowered to take the lead in driving digitalisation of their businesses. They need to make a conscious decision and commit to adopting digital solutions that can drive their business profitability. They should also make use of available resources and seek out digital solutions that are tailored to their specific needs. This will allow them to take advantage of the numerous benefits that digitalisation can bring to their businesses, including the potential for improved access to finance and increased competitiveness.