SME post pandemic recovery

Large scale economic shocks like those that preceded the Coronavirus pandemic of 2020 occur once every few generations, bringing about unforeseeable change that is both permanent and far-reaching in nature. In the race to curb mobility to contain the COVID-19 spread, the global economy had ground to a halt expeditiously.

Singapore’s GDP shrunk by 13.2 per cent prompting a reduction in the GDP growth forecast. Prior to co-founding TranSwap, I myself was no stranger to the implications of large-scale economic disruptions, having conceptualised this company during yet another relatively difficult period in Singapore: The Asian Financial Crisis of 1997.

Having already experienced turbulent financial circumstances, the COVID- 19 pandemic was like history repeating itself albeit on a much greater platform. The only variable that changed was that this time around, there was technology on our side to allow operations to resume. Sure, there were initial kinks, but technological advances sanctioned a relatively greater degree of control and flexibility than matters were back in 1997. For many people, the uncertainty and initial response to COVID-19’s changing landscape set precedence for their ability to cope.

While globally it seemed to be that we were all in the same choppy seas, over the span of a few months, if not weeks, it was apparent that not all businesses were on board the same boat. The differences in the treatment to SMEs was glaring; Interest rates were slashed to new record lows with Central Banks channelling greater efforts into printing money.

The scale at which monetary interventions took place resulted in seemingly optimal financial conditions of the market and yet many companies are still suffering the repercussions of the whiplash brought about with the onset of the pandemic and. When it comes to funding, however, SMEs in the Southeast Asian region do not have access to the lion’s share but instead are at the mercy of the shorter end of the stick.

Also Read: Mekari acquires Qontak to strengthen its end-to-end offering for SMEs in Indonesia

SMEs contribution to the economy

SMEs comprise the largest numbers of businesses globally and are paramount contributors to generating employment opportunities and advancing global economic development. They represent about 90 per cent of businesses and generate at least half the employment opportunities worldwide.

In emerging economies, national income (GDP) constitutes 40 per cent of earnings by SMEs. In Singapore itself, SMEs gives rise to approximately 48 per cent of Singapore’s GDP and employs about 65 per cent of its workforce despite their vulnerability to the ever-changing business climates.

Gaining strength from numbers, just in the last half of a decade, SMEs have provided employment opportunities to 70 per cent of the workforce, thus providing a source of income for the skilled, semi-skilled and even unskilled. At the very core of an SME operations, is its dispensability and the only way that can be defeated is through innovation.

The government, too, attempts to catalyse SME operations through various schemes, grants and incentives such as the Technology Adoption Program (TAP) and Startup SG Tech that allow for companies that showcase the potential to develop proprietary technology solutions and incorporate a scalable business model.

Speaking from first-hand experience as a pioneer figure in the fintech scene in Singapore, it is clear to me that In a rapidly evolving digital world, speed acts as the key determinant of success. With the provision of innovative lending models and scalable funding structure, it is imperative that small enterprises be assisted to stay afloat during the crisis to better be able to position themselves to be innovative.

Furthermore, the fintech industry has a lucrative future and potential alliances have the ability to benefit SMEs in the coming years. After all, when technology finally caught up to complement our vision for easy and safe FX transactions at low costs, we leapt at the opportunity to found TranSwap.

Today, TranSwap is the leading cross-border payment platform for businesses and everyday people in Singapore. With its convenient solution reducing FX costs and complexity, TranSwap empowers businesses to grow globally. TranSwap is fully regulated and licensed in Singapore, Hong Kong, and Indonesia and currently facilitates FX payments in more than 180 countries.

Also Read: KoinWorks hits profitability, securing 100k SMEs as early adopters for its NEO product

Problems in SME Funding

One of the greatest challenges faced by SME when competing for funding resources, however, is the tendency to fall behind due to its limitations in size and the lack of reliability. As a result, SMEs across the region are not equipped with the necessary means to maintain or retrieve further finances. In addition, Southeast Asian financing is met with one of the most notorious financial inclusion in the world.

It is estimated that seven in 10 adults either have no access to long-term saving plans or credit cards and are underbanked or do not even have access to bank accounts.

Technology can bridge the gap between access to finance and business development. Fintech solutions are all about keeping up with the changing times and they have made it possible for people to make digital transactions a more mainstream method and the ease with which this can be done enables stronger insights into creditworthiness and better access to vital finance.

Why do some industries do better than others?

Due to the responsibility of SMEs to drive an economy forward, their operations cannot be left to chance and requires detailed and sound plans to be more aware of strategic operations and at a time like this, to make compelling financial decisions.

The lack of effective communication is a major determinant of SMEs failing post-COVID-19 pandemic as employee engagement took a nosedive. In a study conducted by McKinsey, it was found that 70 per cent of employees attach their sense of purpose to the work that they are required to do.

Companies that have failed to acknowledge the efforts of individuals in their workforce are jeopardising themselves as COVID-19 has subsequently caused members of the workforce to reflect on their purpose in life. The lack of purpose has led to reconsiderations of the kind of work they do, thereby compromising engagement and productivity, leading to further internal changes within the company.

To remain afloat, companies today have to channel efforts into appeasing their stakeholders. While certain industries such as Food & Beverage have flourished, others haven’t been quite as lucky. Global manufacturing has further declined, border controls and logistic service disruptions have dampened operations of international supply chains.

Furthermore, tourism and related businesses have been directly impacted by border closures and quarantine requirements, and some businesses will not survive this period without public support- financial or otherwise. An icon in itself, Singapore Airlines (SQ) has taken a reduction of 99 per cent of its passenger traffic due to COVID-19, efforts have fully throttled to maintain its responsibilities to stakeholders and employees alike; whether it’s engaging stewardesses as safe distance ambassadors or emulating in-flight experiences while grounded, sentiments of locals, staff and the government alike towards to SQ are highly positive.

Also Read: Post-pandemic, we are going to see a slim unicorn

The repercussions of COVID 19 is a healthcare-driven shock in which none of us are immune until everyone is immune. Industries engaging in myopic inertia instead of adopting more agile practices are more likely to compromise their operations. Stimulus packages encourage companies to simultaneously stay afloat and make necessary changes within the optimal span of time.

However, some SMEs have translated the stimulus package support into winding up businesses too quickly or expanding even faster than necessary, resulting in unsustainable growth. Companies need to maintain the balance between being realistic and optimistic as once there is a solution to curb the spread of COVID, the economy can move quickly.

Considerations to include in business models to reduce vulnerability

It is of vital importance that companies recognise whether they need to be focusing on measures to tackle temporary efforts or engage in stringent tactics to induce structural changes. Now, more than ever, making the right decision at the right time is highly warranted. Good decisions are fundamentally rooted in good decisions and despite uncertainties about what the future holds, businesses have to consider what the future could potentially look like.

TranSwap is experiencing this second wave of demand for business-focused solutions, as we are finding it easier to convince businesses to use our services as compared to the past when businesses would question if they can trust such platforms with their money.

Now, the businesses that we work with have made us an integral part of their payments system, incorporating 120 different currencies globally. This did not happen overnight but took a while for us to facilitate trusting relations with clients who appreciate knowing their money is in good hands.

Preparing for recovery allows for business leaders to systematically think through various possibilities and how their business could be affected by the onset of COVID 19 and the threats faced by the organisation in light of potential further deterioration. One of the most glaring disadvantage SMEs have when pitted against MNCs is the lack of data available.

Systematic planning allows greater insights into operations and better allocation of resources to be more informed of strategic decisions their businesses ought to adopt in order to successfully mitigate risks.

Also Read: Future-proofing Singaporean SMEs for a stronger digital future

Furthermore, being vocal about social impacts and honest engagement with stakeholders allows for all parties involved to be aware of the implications of business decisions, i.e investment and public policy.

This allows for businesses to have greater communication with their customers whose acknowledgement of responsibility towards their stakeholders can aid in making fruitful decisions while simultaneously tapping into a new market. This also shows the firm’s willingness and ability to adopt technologies and business models that are needed to be successful in the post-pandemic world.

Lastly, it is imperative to design frameworks that allow the monitoring and where necessary, the reviewing of programmes to ensure they continue delivering and achieving the intended income. Demonstrating an enthusiastic approach towards measuring and improving on impact is crucial for investors to garner the necessary confidence required to maintain investment levels.

While government initiatives are praiseworthy, some businesses also rely on non-governmental organisations who are often faced with challenging opportunity costs and adopting a far-sighted approach and identifying ineffective measures could be a critical element to boost investor confidence.

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Image credit: Andrew Neel on Unsplash

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