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PETALING JAYA: Despite improving digital adoption, small and medium enterprises (SMEs) continue to face significant challenges in their automated transformations.
SME Malaysia national president Chin Chee Seong said while more SMEs in Malaysia have effectively adopted digital tools since the pandemic, adoption remains uneven.
“Larger and more tech-savvy SMEs, especially in urban areas, are using digitalisation to improve efficiency, reach more customers, and grow their businesses.
“However, many smaller SMEs, particularly those in rural or traditional sectors, are still struggling to adopt digital solutions and fully benefit from the digital economy,” he told StarBiz.
Chin said there were several reasons for this. “Many SMEs don’t fully understand the benefits of the digital economy or how to use digital tools effectively.
Some also see digitalisation as too complicated, expensive or unnecessary for their business.”
Apart from lack of awareness and understanding, Chin said there were also financial challenges.
Cost challenges
“Digital transformation needs investment in things like infrastructure, software, training and expert advice. For smaller SMEs with limited budgets, these costs can be a big obstacle.”
He also pointed out that many SME owners and staff don’t have the skills needed to use modern technologies.
“Without proper training, even affordable or subsidised digital tools often go unused,” Chin said.
Small and Medium Enterprises Association Malaysia national president Datuk William Ng said productivity continues to be a major issue for SMEs.
“As we continue to languish in a productivity trap of low value-add, low worker productivity and high cost, we will need to accelerate our productivity, focus on innovation and move up the value chain this year,” Ng said.
Chin said most SMEs struggle with having limited resources.
“SMEs in rural or less developed areas struggle with poor internet access, expensive software, or difficulty accessing government support for digital adoption,” he said, adding that many SMEs are also “not open to change”.
“Some SMEs are hesitant to switch to digital methods due to concerns about disruption, lack of trust in new tools, or a preference for sticking to traditional ways.
“The fear of data breaches and limited knowledge about protecting their systems also make some SMEs hesitant to embrace digitalisation.”
This mindset needs to be changed, said Chin.
First of all, there needs to be an increase in awareness, he said.
“Launch a nationwide campaign to educate SMEs on the real benefits of digitalisation.
“Sharing success stories can build confidence and clear up common misunderstandings,” he said
Chin added that efforts could be made to assist SMEs in their digital transformation journey.
“Government programmes, like the SME Digitalisation Grant, should be made easier to access, with more funding available to help SMEs adopt digital tools.
“Clearer communication, simpler applications and faster processes will encourage more SMEs to use these resources,” Chin said.
More education needed
He added that, moreover, there needs to be improved digital-skills training and better financial assistance.
“Offer practical training programmes for SME owners and staff, focusing on using digital tools, eCommerce platforms, and online marketing effectively.
“Increase grants, subsidies and financial incentives targeted at digital transformation to ease the cost burden on SMEs,” Chin said.
The the relevant authorities could also set up platforms where SMEs share success stories, ideas and advice, encouraging those hesitant to adopt digital tools to take the first step.
“Strengthen internet connectivity, especially in rural areas, to ensure all SMEs can participate in the digital economy regardless of location.
“Providing affordable cybersecurity tools and training can also help SMEs feel confident and safe when adopting digital technologies.”
Meanwhile, on the outlook for the year ahead, Chin acknowledges that this year would be challenging for SMEs to navigate.
“Slower-than-expected recoveries in major economies, combined with inflation and potential interest rate hikes, pose significant risks to exports and SME growth.”
He added that SMEs also face mounting financial pressure from higher wages for foreign workers, levies on foreign labour, higher Employees Provident Fund contributions, a possible hike in electricity tariffs and the costs associated with implementing e-invoicing systems.
“Additionally, the potential rationalisation of subsidies for RON95 petrol could further strain operational expenses.
“SMEs also continue to face challenges in attracting and retaining skilled workers, as they are often unable to match the compensation packages offered by larger corporations.”
Nevertheless, Chin believes that 2025 also offers opportunities that SMEs can capitalise on.
“Government initiatives that will be rolled out this year, are expected to drive digital adoption, enhancing efficiency and helping SMEs remain competitive in a tech-driven economy.
“Recovery in key sectors like tourism, manufacturing and eCommerce, is also expected to boost demand and revenue for SMEs.”
Additionally, Chin said growing support for sustainability and environmental, social and governance compliance, will open new market opportunities and attract environmentally conscious customers and investors.
Source: https://www.thestar.com.my/business/business-news/2025/03/24/smes-in-rural-areas-still-face-challenges-with-adopting-tech