Building Sustainable Cities

Actionable agenda to enable SMEs remain viable: Ease cash flow, empower change

Experts urge industry partners to work together for SMEs to survive and thrive

Industry partners must help small and medium sized enterprises amid the pandemic
Beyond access to credit, SMEs will need support as they accelerate digital transformation and embrace sustainability.PHOTO: GETTY IMAGES

As cities reopen borders and adjust to life with Covid-19, experts believe a return to economic vibrancy will depend on how well small and medium-sized enterprises (SMEs) are able to not only survive, but thrive.

These smaller businesses — overrepresented in sectors hardest hit by the pandemic, such as retail, hospitality, F&B and entertainment — were more vulnerable due to their smaller cash buffers, inventories and supplier networks.

“These vulnerabilities of smaller enterprises translated into a sharp drop in revenues from the outset of the crisis at a faster rate than they were able to cut operating costs, threatening a potential liquidity crisis among SMEs on a massive scale,” the Paris-based Organisation for Economic Co-operation and Development (OECD) said in an April 2021 report.

Extending a credit lifeline

Protecting these SMEs is critical: they account for two-thirds of global employment and half of global GDP, and are customers and suppliers to larger players up and down supply chains.

In Singapore, SMEs (defined as those with annual turnover of less than $100 million or with no more than 200 employees) employed 70 per cent of the workforce last year.

And so, policymakers, financial institutions and other industry players acted swiftly to avoid the knock-on effects of widespread SME failures.

“At the onset of the pandemic, we recognised that many SMEs, which form the backbone of economies, would bear the brunt of the economic fallout and its impact on industries, businesses and families,” says UOB deputy chairman and CEO, Mr Wee Ee Cheong.

UOB was the first bank in Singapore to roll out $3 billion in relief assistance measures in February 2020. “In extending financial relief, we also worked with government bodies around the region, including with Enterprise Singapore, to offer bridging and working capital loans,” says UOB’s Mr Wee.

The bulk of cash payouts from the Singapore government so far has flowed to SMEs. Two-thirds of the $26.7 billion disbursed under the Jobs Support Scheme as at July 2021 went to SMEs, as did 90 per cent of benefits from YA2020’s Corporate Income Tax rebate.

But the foremost lifeline for many SMEs was access to credit.

Over $22 billion worth in loans has been disbursed to more than 25,000 enterprises via the government’s financing support schemes since the start of 2020. With new waves of infection and the return of movement restrictions, however, Finance Minister Lawrence Wong acknowledged in July that access to credit remains critical to SMEs.

To continue helping SMEs weather the pandemic, Singapore extended its Temporary Bridging Loan Programme and the Enhanced Enterprise Financing Scheme – Trade Loans, meant to last till September, for another six months till 31 March 2022. The Government continues to share 70 per cent of the risk under both schemes.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises (ASME), a Singapore not-for-profit organisation, says there had been a round of consolidation among smaller businesses last year.

“Those that are still standing — they are the ones that are resilient. There isn’t any dire call for credit, but there is a call for extension of moratorium for existing loans,” he says.

He sees value in a round of strong credit to further buttress resilient enterprises. “We need to support them and make sure that as we come out of the pandemic gradually, they remain strong companies that can compete in the region.”

Deepening digitalisation

That support must go beyond liquidity support measures to bolster financially fragile SMEs, to structural support measures aimed at helping SMEs “build back better”, the OECD said.

Smaller firms tend to lag behind in the uptake of digital tools and technologies in the best of times. No surprise then that one positive development from the pandemic — with support from many governments — has been to quicken the pace of SMEs’ digital transformation.

About 40,000 of the more than 63,000 SMEs that have adopted digital solutions under Singapore’s SMEs Go Digital programme — launched in 2017 — signed up in 2020 alone. Over 35,000 enterprises had also registered for e-invoicing by early this year, up from just 1,000 a year before.

“As cities locked down and people stayed home during the pandemic, it became critical for SMEs to adopt and to accelerate their digitalisation efforts in order to stay viable,” notes UOB’s Mr Wee.

UOB responded by collaborating with various partners — Google, NTUC Learning Hub, NTUC’s SME arm U SME, and Ngee Ann Polytechnic — to help SMEs go digital. It is an “ecosystem approach”, says UOB’s Mr Wee, that multiplies UOB’s impact.

By April 2020, UOB and Google launched a revised curriculum for its SME Leadership Academy, switching from in-person seminars to online webinars, training retail, tourism and F&B SME leaders to use digital tools for crisis business management. The programme also raised its initial target of reaching 400 SMEs, to 4,000 by the end of this year.

Gains from digitalisation can be swift and tangible. The bank says customers in Singapore, Malaysia, Thailand and Indonesia have seen revenue growth of 15 to 30 per cent after tapping on UOB Biz Smart solutions — an integrated suite of cloud-based business solutions to boost productivity.

Through the pandemic, UOB’s innovation accelerator The FinLab has also run programmes 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 matches them to The FinLab’s network of tech providers and solutions.

“There’s still a lot of room to deepen that digitalisation to allow us not just to conduct transactions domestically, but globally as well,” says ASME’s Mr Wee. 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 long-term structural support: Sustainability. “The unprecedented crisis also led to greater urgency for transforming business models into sustainable ones, in line with increasing regulatory, customer and investor expectations for positive climate change action,” says UOB’s Mr Wee.

The bank sought to simplify sustainability for SME customers by developing sustainable financing frameworks and solutions for specific sectors and value chains. These serve as a guide to measuring environmental and social impact, enabling SMEs to track their sustainability performance and access sustainable financing with ease.

“Because their contribution to the local economy is so huge, SMEs’ commitment to sustainable practices will make a difference,” says Mr Prasenjit PC Chakravarti, strategy and consulting managing director and banking strategy lead, Accenture Southeast Asia.

“From their policies on emissions and water efficiency, to ethical supply chains and environmentally friendly manufacturing, it’s vital that they get support to go green across their operations.”

Last month, enterprise development agency Enterprise Singapore launched its $180 million Enterprise Sustainability Programme to do just that — help at least 6,000 local firms, including SMEs, integrate sustainability into their business strategy and practices, and seize opportunities in the green economy.

“Significant strides in sustainability — that remains a work in progress for many companies,” says ASME’s Mr Wee. “But there is clear recognition that we are not going back to old, dirty ways of doing business: Ways that are pollutive, toxic, inconsiderate of the environment, or unsustainable socially.”

As environmental, social and governance (ESG) concerns increasingly factor into enterprise valuation, as well as an employer’s attractiveness to young talent, they have become essential to the forward-looking SME too, he adds.

This is the 13th of a 15-part series in collaboration with