Even though small and medium-sized enterprises (SMEs) face significant challenges, such as cyber threats and supply chain disruptions, SMEs in Southeast Asia feel optimistic about 2022. According to the Sun Life Survey 2022, Asian companies are rated 65 out of 100 on the Business Growth Index and 55 on the Resilience Index. Yet, many leaders are wary about the threats posed by the COVID-19 pandemic.

Sun Life, a leading financial services company, surveyed 2,400 SME owners in seven Asian markets in 2021: Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore and Vietnam. Its goal was to determine the prospects for SMEs in the region as they navigated multiple problems.

Challenges SMEs face in Southeast Asia

ASEAN SMEs have several challenges, including a lack of finance and support from investors or governments. Banks continue to reject financing to small businesses because they pose too much financial risk. 

How SMEs can leverage alternative funding for growth and scalability

Financial technology (fintech) disruptors mostly help individuals since their methods are geared at addressing consumers rather than SMEs.

Furthermore, SMEs receive inadequate assistance in gaining access to costly digital solutions. Founders lack sufficient knowledge to make the right decisions, and there are not many opportunities for training with experts. Other obstacles include the region’s infrastructure and rural literacy levels. The Russia-Ukraine war has also disrupted global supply chains and hindered small business growth worldwide.

Sun Life findings

According to the Sun Life report, 74% of the respondents anticipated their business’s financial state to improve in 2022, while 70% expected their country’s economic situation to improve this year. There were also plans to grow their businesses, with 84% planning to expand their product range and industries they sell to, digitise their operations, and recruit the best talents.

Increased market competitiveness, the pandemic, and health-related risks were the top concerns of businesses. The COVID-19 restrictions disrupted economies, stifled cash flow, hindered cross-border transactions, restricted imports and exports, and made investors reluctant to invest in fledgling businesses. 

Another unanticipated difficulty arose when the demand for certain products and services decreased, resulting in revenue and customer losses.

Companies determined that adjusting their business strategies, innovating, and adapting to the conditions would be the key to resilience and managing the pandemic and its consequences. Of the 90% that adapted their strategy, 51% added new distribution techniques, 43% virtualised their business, and 33% opted to offer new products.

Emerging trends in Southeast Asia

SMEs adapting to the global crisis is excellent for Southeast Asia since it assures they will survive whatever challenges they experience moving forward. The region’s digital transformation will play a significant role in increasing business growth, resilience, and expansion into new markets.

Blockchain and cryptocurrency technologies can help SMEs find alternate funding sources as they struggle to attract potential investors. Some blockchain-powered games enable users to buy and trade virtual assets, allowing them to raise funds to invest in their businesses.

Internet usage and smartphone adoption in the Association of Southeast Asian Nations (ASEAN) reinforce the optimistic view that 2022 holds tremendous promise for SMEs. The adoption of 5G technology will improve internet speeds, connectivity, and user experiences on digital platforms. 

Fintech is expanding, and more innovative technologies are emerging to further its influence. Most fintech solutions are geared at consumers, however, SMEs may make significant efforts to include banking and other financial services into their product and service offerings. They can, for example,  offer customers Buy Now Pay Later (BNPL) options, use fintech to pay suppliers, or offer rewards, such as discounts through smartphone apps.

Because the demand for IT talent is high and the supply is limited, SMEs must address the issue. One solution is to teach recruits to bridge the digital and financial skills gap. Instead of replacing current employees, businesses could consider upskilling them.. There is still the option of hiring foreign talent to fill any talent shortages in the organisation, since they may offer the necessary creativity to expand the business.

Finally, for the region’s SMEs, government support, investment, and startup-friendly regulations will be crucial. There should be special agencies focused on the well-being of startups, such as Enterprise Singapore. Furthermore, training programmes should be designed to equip founders and SME leaders with the skills necessary to take their businesses to the next level.

The Sun Life Survey 2022 predicts a bright future for SMEs in Southeast Asia, with high resilience and growth figures. The challenges will continue, which is why the region must safeguard and nurture the SME ecosystem to generate more revenue, enhance innovation, and elevate ASEAN.