Feasible program to keep SMEs viable: Facilitate Cash Flow, Drive Change, Business News & Top Stories
As cities reopen borders and adjust to life with Covid-19, experts believe the return to economic vitality will depend on the ability of small and medium-sized enterprises (SMEs) not only to survive, but also to thrive. .
These small businesses – overrepresented in sectors hardest hit by the pandemic, such as retail, hospitality, foodservice and entertainment – were more vulnerable due to their cash reserves, inventory and of their smaller supplier networks.
“These vulnerabilities of small businesses translated into a sharp drop in revenues early on in the crisis at a faster rate than they could reduce operating costs, threatening a potential liquidity squeeze among SMEs at large-scale, âsaid the Paris-based organization. for Economic Cooperation and Development (OECD) said in an April 2021 report.
Extend a line of credit
Protecting these SMEs is essential: they represent two-thirds of global employment and half of global GDP, and are customers and suppliers of more important actors up and down supply chains.
In Singapore, SMEs (defined as those with annual sales of less than $ 100 million or with no more than 200 employees) employed 70 percent of the workforce last year.
Thus, policy makers, financial institutions and other actors in the sector acted quickly to avoid the spillover effects of widespread SME bankruptcies.
âAt the onset of the pandemic, we recognized that many SMEs, which are the backbone of economies, would bear the brunt of the economic fallout and its impact on industries, businesses and families,â the vice-president said. President and CEO of UOB, Mr. Wee Ee. Cheong.
UOB was the first bank in Singapore to deploy $ 3 billion in emergency aid measures in February 2020. âIn extending financial assistance, we have also worked with government agencies in the region, including with Enterprise Singapore, to provide bridging loans and working capital loans. Said Mr. Wee of UOB.
So far, the bulk of the Singapore government’s cash disbursements have gone to SMEs. Two-thirds of the $ 26.7 billion disbursed under the employment support program in July 2021 went to SMEs, as did 90% of the benefits of YA2020’s corporate income tax refund.
But the main lifeline for many SMEs was access to credit.
More than $ 22 billion in loans have been disbursed to more than 25,000 businesses through government funding support programs since the start of 2020. However, with new waves of infection and the return of movement restrictions, the Finance Minister Lawrence Wong acknowledged in July that access to credit remains essential for SMEs.
To continue helping SMEs weather the pandemic, Singapore has extended its Temporary Bridge Loan Program and Enhanced Business Finance – Commercial Loans Program, which is supposed to last through September, for an additional six months until March 31, 2022. The government continues to share 70% of the risk under the two regimes.
Mr Kurt Wee, chairman of the Association of Small and Medium Enterprises (ASME), a non-profit organization in Singapore, said there had been a wave of consolidation among small businesses last year.
âThose who are still standing, they are the ones who are resilient. There is no urgent credit appeal, but there is a call to extend the moratorium on existing loans, âhe said.
He sees value in a strong credit round to further strengthen resilient businesses. “We need to support them and make sure that as we gradually emerge from the pandemic, they remain strong companies that can compete in the region.”
This support must go beyond liquidity support measures to support financially fragile SMEs, to structural support measures aimed at helping SMEs “build back better,” said the OECD.
Small businesses tend to fall behind in adopting digital tools and technologies at the best of times. It is therefore not surprising that a positive development of the pandemic – with the support of many governments – has been to accelerate the pace of the digital transformation of SMEs.
Around 40,000 of the more than 63,000 SMEs that have adopted digital solutions through Singapore’s SME Go Digital program – launched in 2017 – have registered in 2020 alone. More than 35,000 businesses had also signed up for electronic invoicing earlier this year, down from just 1,000 a year earlier.
âAs cities have closed and people have stayed at home during the pandemic, it has become essential for SMEs to embrace and accelerate their digitization efforts in order to remain viable,â notes UOB’s Wee.
UOB responded by working with various partners – Google, NTUC Learning Hub, U SME, the SME branch of NTUC and Ngee Ann Polytechnic – to help SMEs go digital. It’s an âecosystem approach,â says UOB’s Wee, which multiplies UOB’s impact.
In April 2020, UOB and Google launched a revised curriculum for its SME Leadership Academy, moving from in-person seminars to online webinars, training SME leaders from retail, tourism and catering to use of digital tools for crisis management. The program has also raised its initial target of reaching 400 SMEs to 4,000 by the end of this year.
The gains from digitization can be quick and tangible. The bank says customers in Singapore, Malaysia, Thailand and Indonesia saw revenue growth of 15-30% after using UOB Biz Smart Solutions, an integrated suite of cloud-based business solutions for increase productivity.
During the pandemic, UOB’s innovation accelerator, The FinLab, also implemented programs to help more than 1,500 SMEs in Malaysia and Thailand go digital. It launched a digital platform hosting regional knowledge, tools and resources for ASEAN SMEs. It also associates them with the FinLab network of suppliers and technological solutions.
âThere is still a lot of room to deepen this digitization to enable us not only to transact nationally, but also globally,â said Mr. Wee of ASME. The next step for many local SMEs will be to use digital platforms and transactions to reach ASEAN, China and other larger markets, he adds.
Deeper shade of green
Another area of ââlong-term structural support is sustainability. “The unprecedented crisis has also led to a greater urgency to transform business models into sustainable models, in line with growing expectations from regulations, customers and investors for positive action on climate change,” Wee said of UOB.
The bank has sought to simplify sustainability for SME clients by developing sustainable financing frameworks and solutions for specific sectors and value chains. These serve as a guide for measuring environmental and social impact, allowing SMEs to track their sustainability performance and easily access sustainable finance.
âBecause their contribution to the local economy is so huge, the commitment of SMEs to sustainable practices will make the difference,â says Mr. Prasenjit PC Chakravarti, Managing Director of Strategy and Consulting and Head of Banking Strategy, Accenture Southeast Asia.
âFrom their policies on emissions and water efficiency to ethical supply chains and environmentally responsible manufacturing, it’s critical that they get support to go green in all of their operations. “
Last month, business development agency Enterprise Singapore launched its $ 180 million corporate sustainability program to do just that – helping at least 6,000 local businesses, including SMEs, embed sustainability into their business strategy and practices and to seize the opportunities of the green economy.
âSignificant progress in sustainability – this is still a work in progress for many companies,â says Mr. Wee of ASME. âBut it is clearly recognized that we are not going back to old dirty ways of doing business: ways that are polluting, toxic, reckless to the environment, or socially unsustainable. “
While environmental, social and governance (ESG) concerns increasingly enter into the valuation of the company, as well as the attractiveness of an employer for young talents, they have also become essential for the turned SME. into the future, he adds.
This is the 13th in a 15-part series in conjunction with