The Covid-19 pandemic has forced businesses from retail and manufacturing to service providers to re-evaluate their business models where the traditional “in-person” and “social” setting is the norm. The new norm, however, has paved the way for corporates to incorporate a bigger portion of their business process with an innovative “contactless” method of delivering their products and services.
Similar to bigger corporates, small and medium-sized enterprises (SMEs) also have to adapt to this new norm in order to survive in the current economic climate. This has led many Sri Lankan SMEs to look at digitalising as their lifeline.
Digitalisation and digital tools have proven they can benefit SMEs, with a 2019 economic survey of Singapore’s first quarter finding that firms who are adopting digital tools increased their value by 25% and their productivity by 16% on average.
During a webinar titled “Use of Digital Platforms for SMBs (small and medium businesses)”, State Minister of Samurdhi, Household Economy, Microfinance, Self-Employment, and Business Development Shehan Semasinghe highlighted the importance of digitalisation for the SME segment as well as the importance of SMEs to Sri Lanka’s economy.
The Government of Sri Lanka has recognised SMEs as the backbone of the economy, as it accounts for more than 75% of the total number of enterprises, provides 45% of employment, and contributes to 52% of the gross domestic production (GDP), according to the National Policy Framework for SME Development.
“I think from the looks of the current situation, this pandemic will prevail for a few more months, so more SMEs will have to move into digital platforms to survive, and we need to help the sector because they contribute a lot to the local economy,” said Semasinghe, speaking at the online event hosted by the Ceylon Chamber of Commerce on 11 November.
During the event, Helani Galpaya, CEO of LIRNEasia, a Colombo-based think-tank, stated that there has been a significant improvement in Sri Lanka when it comes to internet use in the last few years, compared to a lot of our regional counterparts. However, she stated that according to the recent research report the think-tank released in March 2020, titled “ICT (Information and communications technology) access and use in SMEs in Sri Lanka”, the country has a long way to go.
She looked at the findings for Sri Lanka from their research which included 32 other countries, while drawing from nationally representative samples of individuals and businesses.
Galpaya stated that in the research, nearly 90% of businesses they surveyed used their mobile phones for business activities, but only 65% of them have a dedicated phone number for their business. They also witnessed that computer ownership among these SMEs were low. However, the ones who own computers deem them important to their business continuity, and about half of them had set up a website for their enterprise.This not only included standalone websites, but also social media pages.
“40% of businesses use the internet or social media for various activities in their business, and they all stated that it was an important tool for their business. Many of them used it for marketing and to receive orders online.”
The research went on to state that the software used by these SMEs were mainly focused on sales, accounting, and enterprise resource planning. However, only one-fifth of these enterprises utilised softwares to give them operational efficiencies.
The research later took 29 indicators of ICT used by these enterprises, such as how they talk to their suppliers, how they get orders, what are the types of devices they have, and can the SMEs contact their employees through ICT. Galpaya stated that they then asked an algorithm to group these enterprises into two groups: High ICT use SMEs and low ICT use SMEs.
She explained that from this they saw that only 30% of SMEs in Sri Lanka can be classified as the high ICT use category. She went on to state that high ICT use strongly correlated with SMEs expanding into larger enterprises. Therefore, it further highlighted the importance of digitisation when it comes to enterprises growth, achieving efficiency, and their ability to reach other markets.
Galpaya stated that these high ICT using SMEs have roughly 2.9 or three times the monthly income compared to low ICT using SMEs. This is due to the branding and advertising that high ICT use opens up.
“71% of high ICT users advertise on more channels and are able to have a better relationship with the customer, through things like loyalty programmes, while only 25% of low ICT users advertise digitally, that also being limited to less sophisticated levels of advertising like mobile messages.”
She stated that other advantages include the geographical diversity high ICT users get when it comes to suppliers. In the research, it showcased that about 50% of high iCT users had foreign suppliers and about 40% had suppliers from all over the country. Only about 3% of low ICT users have foreign suppliers.
She went on to state that even when it comes to bank accounts, 90% of high ICT users had dedicated bank accounts for their businesses; while low ICT users were more likely to use their personal bank accounts.
Galpaya stated that SMEs that are integrated into global value chains and are able to sell their products or services overseas are guaranteed to make more income, and at a macroeconomic level, it is a very valuable way to bring in foreign revenue to the SME’s income. High ICT users were more likely to have their main customers to be from the international market, depending on the sector, and had customers from all corners of Sri Lanka.
She stated that especially with the ongoing pandemic, it is important for SMEs to have an online platform to even reach the local market.
Consumer’s point of view
Galpaya stated that they found that a very few people in Sri Lanka are willing to engage in e-commerce. She explained that they were more likely to use online platforms to search for new businesses, rather than using that platform to purchase anything.
“They are more likely to go physically and complete the transaction rather than completing the e-commerce journey by paying online as well.”
Despite this, according to Facebook Sri Lanka Policy Programmes Manager Yasas Abeywickrama, Sri Lankan consumers have been making more of a shift towards digitalisation since the first outbreak of the virus in March.
During the online event, Abeywickrama spoke about a research they conducted to understand Sri Lanka’s potential for digitisation in order to aid the local businesses better during the pandemic. The research, which was done in July 2020, had surveyed 500 consumers to understand their side when it comes to SME digitisation.
They found that around 56% of consumers said that social media had helped them discover new businesses, out of which 43% stated that the businesses they discovered were local SMEs. Abeywickrama stated that the research also showcased that consumers are now having a tendency to support local SMEs during their time of need, and therefore have begun to move away from larger corporations.
“69% of the consumers we surveyed said that they moved from their previous providers to local SMEs, and 70% of these SMEs were found through social media.”
He stated that in the survey, 58% of the consumers stated that they also used social media business pages to find business information, and 83% of them have stated that they have used some sort social media or online messaging – such as Facebook, Messenger, and WhatsApp – to communicate with businesses.
Moreover, Abeywickrama stated that 56% of the consumers also stated that they find business content shared on social media more engaging, adding: “We also found 66% of them have communicated with businesses via Facebook, while 83% have communicated through WhatsApp.”
ICTA
Finally, Information and Communication Technology Agency (ICTA) Chairman Jayantha De Silva stated that SMEs in today’s context do not want to always remain SMEs, and instead want to expand into large-scale companies. Due to this, and given the current environment, he stated that digitisation is key for their survival as well as growth.
“As the lead agency in Sri Lanka for the implementation of ICT, we see the importance of digitisation for SMEs and the importance of SMEs to Sri Lanka’s economy. Due to this, we have laid out a road map for the future, and we are targeting to support a 100 start-ups that are considered SMEs in the next four years, when it comes to ICT.”
Source: http://www.themorning.lk/smes-urged-to-digitalise-to-survive/