A business sentiment survey conducted by RAM-CTOS under the Business Confidence Index indicated a decline for the second consecutive quarter in 4Q 2023, pulled down by the negative sentiments of micro, small and medium enterprises (MSME) respondents.
According to the survey, the overall index fell to 48.9 from 50.4, signalling pessimism about business prospects in the next three months. Bearish sentiments were particularly pronounced for MSMEs. Expectations for sales growth, profitability and capacity utilisation were weak across the board. Rising costs of doing business and weaker economic growth were the key reasons attributed by the 141 firms polled for this survey.
Cost pressures continue in 4Q 2023
Business conditions largely worsened among surveyed firms towards the latter portion of the year. Nearly 40% and 50% of respondents reported lower sales and profit in 4Q 2023 compared to 1Q 2023. This is particularly acute among MSMEs as costs continue to inflate, with limited ability to fully pass on cost increases to customers. In contrast, corporate firms that made up about 30% of this survey’s respondents fared better, with a bigger share of firms reporting higher sales and profits at the year end than in 1Q 2023. MSMEs also faced tighter cashflow and access to financing during this period than corporates.
Smaller firms rely more on financial support
While around half of respondents would welcome government assistance in dealing with the rising cost of doing business, their needs differ. Financial assistance is most needed by micro firms, while for SMEs and larger companies, support for business enhancements, including automation and training are more relevant as they move up the value chain.
The survey’s findings RAM said underscores the necessity for a tailored approach in addressing the diverse needs of businesses. While financial aid remains crucial for MSMEs, the SMEs and larger corporations seek support in enhancing their operations, including automation and upskilling to navigate the evolving business landscape. At CTOS we’ll focus on leveraging our strengths to support the broader business ecosystem, offering various innovative solutions to mitigate cost pressures and enhance cashflow such as CTOS Credit Manager, CTOS eKYC digital onboarding solutions, CTOS Application and Decisioning platform and so on. It is also worth noting that in Budget 2024, the government is offering substantial funds to assist SMEs in digitalisation, providing a unique opportunity for businesses. Therefore, it is crucial for businesses to adapt and take advantage of this funding,” commented Erick Hamburger, Group CEO of CTOS Digital Berhad.
Government assistance to be better communicated for effective outreach
The government is cognisant of supporting MSMEs, given their sizable contribution to the economy. The recent Budget 2024 announced various grants and schemes to support and strengthen MSMEs. However, the survey indicated that accessing to government support programmes remains a challenge, particularly for micro firms. For instance, close to 70% of micro firms do not plan to utilise the automation and training schemes announced under Budget 2024 and the main reason cited was simply not knowing where and how to apply for these schemes. For SMEs, around 80% intend to utilize the schemes for automation and/or training and around a quarter expressed facing similar barriers to access.
“Government schemes are needed to support MSMEs to scale up and innovate, but they should be preceded by effective communications and outreach programmes to reach the right target groups. Onboarding and administrative processes should also not be overly complex or cumbersome for applicants,” said Chris W.K. Lee, RAM Holdings Berhad Group CEO and Executive Director.
