KUALA LUMPUR: A high-cost environment remains a concern for miccro, small and medium enterprises (MSMEs), with the majority, 88 per cent expecting costs to increase in the next 6 to 12 months.
The SME Sentiment Index for 2H2023 by Small and Medium Enterprise Development Bank Malaysia Bhd surveyed 423 respondents from various sectors and sizes of business between July and October 2023.
The survey found that the sentiment is particularly pronounced in service subsectors such as information communication technology (ICT), utilities, and food and beverages.
Respondents, 98 per cent of them, also acknowledge the profound impact of inflationon their business performance.
In addition, changes in government policies (88 per cent) are perceived as impactful, including targeted subsidies, political uncertainty, and regulatory requirements such as Environmental, Social, and Corporate Governance (ESG) adherence, tax compliance, and labour laws.
While the majority (66 per cent) still have cash reserves for more than six months, the trend is shifting whereby the share of respondents (36 per cent) having a cash buffer for more than a year has been drastically reduced, compared to 1H (50 per cent).
Despite that, only 44 per cent of respondents are seeking alternative financing options, reflecting a sharp decrease from the first half.
Sectors with lower cash reserves are also exploring partnerships, collaborations, and negotiating payment terms with suppliers to mitigate financial challenges.
In line with economic recovery, 67 per cent of MSMEs plan to expand their workforce in the next 6 to 12 months.
Notably, the trend towards hiring non-full-timers is on the rise, indicating a preference for flexibility in adapting to market conditions.
Overall, MSME were slightly more optimistic for the second half of 2023,than the first half of 2023.
The SME Sentiment Index revealed a slight increase from 52.9 in the first half to 53.5 in the second half of the year.
"This signifies that small and medium-sized enterprises continue to demonstrate positive viability and resilience. It is encouraging to see that business owners are maintaining a positive outlook, showing resilience and adaptability as they navigate the challenging economic landscape. These findings further strengthen our belief in the potential and endurance of our business community," SME Bank group president/chief executive officer, Datuk Aria Putera Ismail said in a statement.
