Growth amidst change

Defining small businesses: The agency is taking a measured approach to study all angles before it redefines SMEs. — Reuters

IT has been slightly more than a year since Noor Azmi Mat Said took over the reins as chief executive officer of SME Corporation Malaysia.

Over the past 12 months, Noor Azmi has not only been focusing his efforts on maintaining the mandate given to the central coordinating agency to coordinate the implementation of all government SME development programmes, but also in keeping house.

“I came in during a period of transition and multiple changes, which is where I had to take the time to understand the SME landscape, be it the strength of our SMEs, the competencies of SME Corp, how we benchmark our SMEs against their peers in developed nations and so on, ” he explains.

At the time, SME Corp had just been placed under the purview of the Ministry of Entrepreneur Development (MED) from the Ministry of International Trade and Industry, with the government shifting from the SME Masterplan 2012-2020 to the National Entrepreneurship Framework 2030, and from the 11th Malaysia Plan to the 12th Malaysia Plan and Vision 2020 to the Shared Prosperity Vision.

Amongst the key changes he has made is a structural one, by breaking down the vertical organisational structure to a flat one to boost empowerment among employees, which changes the way SME Corp approaches things.

Another fresh idea he has implemented within the organisation is taking the more proactive approach of ‘foresight’ strategic planning based on future needs, rather than existing ones.

He opines, “If you plan for what’s needed now, it’s going to be outdated by the time you execute it one to two years down the road, so what we do is anticipate what’s going to happen in the future and plan towards that.

“For example, digitalisation is a must, so we look at how we can assist SMEs in this. We look at the whole ecosystem to identify the gaps between the efforts of other agencies working on digitalisation and work towards addressing it, instead of duplicating efforts.

“We then create proper programmes that meet the requirements of SMEs at different stages, as micro, small or medium enterprises have different needs when it comes to digitalisation.”

The introduction of the Technology Needs Pitching sessions, launched during the Future SME Conference in October 2019, is case in point.

To promote technology transfer and innovation for the entrepreneurial ecosystem, the session provides a platform for technology providers or developers to pitch their innovations in various fields to SMEs keen on exploring new technology.

At the same time, through PlaTCOM Ventures Sdn Bhd – a strategic collaboration between Agensi Inovasi Malaysia and SME Corp – the agency has access to more than 150 technologies that it is seeking to pitch to SMEs.

“The idea is to commercialise and monetise the technologies in that way. To ensure that SME contribution to the GDP reaches 50% by 2030, there are eight intervention measures to bridge the gap.

“Among those are increasing connectivity, digitalisation and also cybersecurity, which must be done together. And then we work on increasing the supply chain of SMEs supplying to larger companies, with one way being inclusive business, ” he says.

SME Corp itself is adopting digitalisation and creating agile environments to enable the entire organisation to move forward. It makes full use of collaborative modes on online platforms and newer business tools such as the Business Model Canvas or the Lean methodology, by exposing the employees in its workforce to such technologies and knowledge.

For instance, the agency has representation in every state through respective state directors, who are equipped with the required knowledge to advise and do business counselling for SMEs.

“We have to optimise the workforce we have, which is where digitalisation and agile environments come in to enable us to work on a platform with a multi-team internal taskforce.

“SME Corp also has to be ahead of entrepreneurs when it comes to tools, which is why we’re building up the strength and capacity of our business counsellors. They’re already doing business counselling, but we reinforce them with knowledge so that we can upskill them to make a difference on the ground.

“Internally, the focus will be on digitalisation, sustainability in terms of revenue generation in different areas, as well as upskilling our workforce to strengthen competencies to give something of value, ” he explains.

Taking a new approach

Moreover, Noor Azmi’s philosophy is to ‘do more with less’, which is something he wants to achieve throughout the organisation.

“Doing more with less means we will do a lot of collaborations and leverage the strength of our partners, especially as we’re trying to be self-sustainable through diversifying or monetising our revenue channels, ” he says.

One way is through taking a closer look at the assistance it has already given to companies that have successfully raised funds through equity crowdfunding, with the other being its SME Investment Partner (SIP) Programme, which has RM40mil under RHL Ventures Sdn Bhd and the remaining RM50mil with Warisan Quantum Management Sdn Bhd.

The intention is to facilitate an investment scheme to assist and equip viable companies that already have proof-of-concept and traction with governance, in preparation for the LEAP or ACE Market.

When it comes to SMEs, the areas SME Corp will be paying attention to include facilitating access to funding, capacity building for entrepreneurs, product development in terms of creating compelling products or business models, easing access to local and global markets and ensuring regulations support SME businesses.

Alternative financing, for one, is the way forward as the agency is working towards weaning SMEs off pure grants, namely systems such as interest rebates for SME loans or a hybrid approach via initiatives like Go Export.

In 2020, SME Corp will be managing the Go Export programme, which was previously handled by the Malaysia External Trade Development Corporation (Matrade).“Matrade has done well with Go Export, but we will use that fund to assist or back-up its Market Development Grant (MDG) in a different way. The grant covers SME market development and going overseas, but we need to support SMEs in qualifying for export.

“We want to encourage those that are currently not exporting but have the potential to do so, so that it adds more value to the MDG with more quality companies, ” he opines.

In terms of regulations, MED is ironing out the technicalities of ensuring that 30% of all government procurement are from SMEs, which Noor Azmi hopes can be realised by next year.

To facilitate matters, SME Corp is eyeing the registration and accreditation of SMEs, to ensure that its programmes and initiatives actually benefit quality SMEs that truly require the assistance.

Armed with the certification, companies that qualify can approach financial institutions or government agencies to enjoy SME benefits such as lower tax, special funding and incentives amongst others.

“Our current definition dates back to 2014. We’re taking a careful and measured approach in studying it now – how we’re going to define SMEs, what areas to change, if we need to address capital expenditure – since there’s a lot of implications to the nation’s taxation system.

“A lot of data is needed to convince the relevant ministries, especially the Ministry of Finance, when it comes to matters of taxation, so it’ll take some time, ” he notes.

Reaching critical mass

Aside from these five key areas, SME Corp is also looking into the aspects of sustainability and inclusiveness.

To create a larger mass of entrepreneurs to sustain economic growth and facilitate further opportunities for collaboration or joint ventures, for instance, SME Corp has invested into various programmes to generate new entrepreneurs.

“It’s about continuity and sustainability is among our agenda through the inclusive business model, tweaking and structuring what’s happening in the current ecosystem to make it more meaningful and create bigger impact with the resources we have, ” he adds.

The concept of inclusive business, he says, is to create multi-faceted wins for the government and low-income people and businesses in the B40 income group, in line with the concept of shared prosperity.

SME Corp is working with the United Nations Economic and Social Commission for Asia and the Pacific and the Inclusive Business Action Network to produce a full landscape study deploying inclusive business in the country.

According to Noor Azmi, the agency could be kicking off the implementation of inclusive business to grab low-hanging fruits by February 2020. This could see public-private partnerships utilising corporate social responsibility funds to develop entrepreneurship at the B40 level, thus making such efforts sustainable as well. By then, SME Corp will also be rolling out and implementing certain projects.

“When things have firmed up a bit more in late Jan to early February, There’ll be something to look out for in the five areas I’ve mentioned earlier, ” he shares.

Aside from that, SME Corp is also considering playing a role in the development of SMEs in ‘hidden gem’ industries such as gaharu, bird’s nest, packaging, as well as boat-building and boat repairs.

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