A 2008 Learning Lab sponsored and facilitated by Maybank.
Ms Sally Ann Foley, Head of Marketing, Sales and Communications of Maybank’s Business Banking Division, commenced the lab with her presentation on Maintaining Sustainable Business Growth & Profitability of Small & Medium Enterprises (SME) for Women. She empathised with business owners on the challenges they are facing due to the current economic climate.
On the macro level, these include sluggish domestic demand and uncertainty about the future, intensified domestic, regional and global competition and the need to constantly invest in emerging technologies in order to remain competitive.
At the micro-level, there are still other issues to address: the shortage of skilled personnel for the new business environment, limited access to finance and capital, lower sales volume and delays in making collections. Businesses also have to contend with rising costs stemming from the climbing price of fuel and difficulties managing cash flow. Without economies of scale, costs are higher and it becomes more difficult to negotiate for the best prices and rates. A demoralised workforce also contributes to drops in productivity.
Although it may seem to be counterintuitive, a business slowdown sometimes offers valuable time for business owners to sharpen their management skills, evaluate their business, and focus on improving financial practices within the organisation. Part of this includes acquiring new skills and knowledge, and taking time to refine business operations and strategies. It is also useful to see how corporate & social responsibility (CSR) principles can be integrated into business operations and outlook. Professional advice may be useful for key elements of their business.
Women-owned SMEs can better equip themselves to face the changing economic climate by monitoring changes in the market. They can also look into ways to improve productivity and upgrade technology and their familiarity with technology. This is also a strategic opportunity to energise their team and look at revamping their brand, products or image.
Among the steps that can be taken to reduce the risk of business failure, improving financial management is the most critical. In particular, business owners need to be wary of the following contributing causes to business failure.
• Poor cash flow – due to declining sales, poor collections or overstocking
• Overgearing – this leads to an inability to generate cash-flow to repay loans and meet other commitments
• Funding mismatch – in tenure of loan or in currency denomination
• Inappropriate use of financial derivatives – may result in huge losses if the value of underlying instruments moves against the borrower
Sources of financing and advice for SMEs
• The SME Corporation of Malaysia
• The Credit Guarantee Corporation ( CGC )
• The Agro Bank
• SME Bureau
• Bank Pembangunan Malaysia
Businesses need to have a good track record to gain access to credit facilities from financial institutions. Funds are available for SMEs, specifically for the expansion of production capacity and working capital in the order of RM50,000 to RM5 million. These are open to Malaysian-owned businesses in which shareholder funds do not exceed RM2 million. The interest rate charged is 4-6 per cent per annum for up to five years.
The New Principal Guarantee Scheme provides viable small businesses with guaranteed cover for credit facilities up to RM10 million. This involves guaranteed cover of up to 90 per cent (with collateral) and 80 per cent (without collateral). It also offers a Direct Access Guarantee Scheme (DAGS) which enables entrepreneurs to obtain guarantee cover directly from CGC for sums ranging from RM50,000 to RM2 million for up to 5 years.
Venture capitals are an alternative source of financing. For example, Pembangunan Ekuiti within the Bank Pembangunan Group offers financing to the following sectors: oil and gas, food processing and distribution, ICT products and services and general services.
Puan Suraya Bt Nassaruddin, Assistant Vice-President of Derivate and Structured Products, shared her insights on Hedging Foreign Exchange and Interest Rate Risks; while Puan Zaherah Bt Mohd Azmi, Head of Cash Management for Corporate and Government Business, elaborated on the latest developments in Transaction Banking.
Dr Marziah Yaacob of Etiqa Personal Insurance was also on hand to offer insights on Wealth Protection and Creation. She said the one thing women could do immediately to improve their financial situation is to limit borrowing, and cut down on credit card use, which has a tendency to lead people to overspend.
She encouraged participants to consult experts to assess their financial fitness. This would form the basis of their financial planning for all their personal and family needs, covering retirement funds, education funds for children and others.