SMEs and the Pandemic: A Digital Future

SMEs and the Pandemic: A Digital Future

By Maryam Nazir Chaudhary


Globally, SMEs, or small and mid-size enterprises, characterize approximately 90% of businesses and greater than 50% of employment. Moreover, SMEs contribute to 40% of national income gross domestic product (GDP) in economies.

In Malaysia, the SME sector makes up the majority of the country’s business activities, and thus, significantly impacts economic growth. SMEs account for 97.3% of the total businesses in the country. Contrastingly, SMEs only contribute to 35.9% of the country’s gross GDP. This strongly emphasises and highlights the need to further boost the growth of and provide support to local SMEs.

The Global Pandemic

The first Covid-19 case in the world was detected on December 31st, 2019, in Wuhan City, located in the Hubei Province of China. The disease swept through the country, taking nearly hundreds of lives daily. Soon, countries across the globe, such as Italy, the United States and India fell to the communicable disease. Lockdowns were implemented, stay-at-home orders directed and international travel banned. Over 6 million individuals lost their lives to the communicable disease.

The first wave of Covid-19 cases in Malaysia included 22 individuals arriving from between January 25th to February 15th. The first ever case in the nation was declared on March 2nd, 2020. Subsequent cases spread largely through mass gatherings and international travellers. To date, there have been nearly 5 million Covid-19 cases in Malaysia, with over 36,000 deaths.

Economic Impact

To curb the number of rising cases, the Malaysian government implemented Movement Control Order (MCO) and put the country under lockdown. This negatively impacted entire industries and brought business to a standstill. In fact,reports that nearly 70% of SMEs declined by 50% in only the first week of the implementation of the nation-wide lockdown. In Indonesia, nearly 40% of SMEs reduced their stock of goods, whereas over 16% decided to decrease their workforce

Malaysia is not alone in its commercial downturn – countries across the globe are expected to undergo an economic recession. It is in these unprecedented and challenging times that SMEs must adapt, adjust and acclimatise by implementing drastic changes in order to remain relevant, sustainable and profitable.

Moving Forward

In these adverse conditions, SMEs must exhibit agility and resilience with regards to their business strategies. They must constantly seek new opportunities for expansion, growth and improvement – one such essential player would be digitalisation. This involves creating a digital culture to ultimately increase income via big data analytics, additive manufacturing and artificial intelligence and more.

The Malaysia Digital Economy Corporation (MDEC) reported that during the pandemic, e-commerce business grew – rather than deteriorated – by 53% to 144% for online shopping and goods delivery services. SMEs, on the other hand, depreciated, as mentioned previously. Furthermore, several local SMEs complained of their struggles in communicating with their customer base and suppliers due to lack of investments in technology.

The Malaysian government understands the vitality of digitising SMEs. During the pandemic, SMEs were granted financial funds to better align their businesses with the technological needs of today. In collaboration with Bank Simpanan Nasional (BSN), SME Bank and MDEC, the government has allocated five hundred million Ringgit for this cause. Yet another initiative to aid the digitization of SMEs and boost economic growth is the PERIHATIN Economic Stimulus Package.


Integrating technology into the very core business strategies of SMEs is essential for successful engagement with their respective consumers. Moreover, a digital transformation will allow management to make better informed decisions and retain competitiveness. If SMEs wish to remain sustainable in the long-run, they must revamp their way of working and alter their operations by adopting digital strategies to better connect with their consumers, increase efficiency and remain cost-effective.

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