#7 : Assessment of Low Adoption of Digital Technology in Micro and Small Enterprises

The adoption of digitalization in Micro and Small Enterprises (MSEs) has become increasingly important in today’s technological age. Digitalization refers to the integration of digital technologies into various aspects of business operations to enhance efficiency, productivity, and competitiveness. Digital tools and online platforms provide MSEs with opportunities to reach a wider customer base beyond their local markets. E-commerce platforms, social media marketing, and digital advertising allow MSEs to showcase their products or services to a global audience, increasing their market reach. Moreover, digitalization can help MSEs reduce costs because there is less need for physical infrastructure and reduces IT-related expenses. Malaysia has made significant progress in promoting digital transformation at the national level, however there are still challenges faced by micro and small enterprises (MSEs) that hinder their adoption of digital technology.

The recent Covid-19 pandemic crisis has caused closure of non-essential businesses and restricted the mass through the movement control order (MCO). It was reported that 70 percent of SMEs reported a 50 percent drop in sales, although online businesses such as online grocery shopping, online food delivery and online shopping has increase between 50-144 percent in sales (Tong and Goh, 2020). Realising the impact of such disruptions, awareness and promotion efforts for digital adoption should be escalated for business owners to sustain their businesses.

This policy brief discusses the current digital ecosystem used in MSEs, challenges in adopting digital technology, gender considerations in the adoption of digital technology and proposes a range of policies to ensure facilitation of digital adoption. A quantitative approach using survey questionnaire was performed in 2022 on micro and small enterprises owners in Klang Valley with the financial support from the Institut Masa Depan Malaysia. This policy brief can be used as a guide for various stakeholders as it shed light on MSEs business owners’ preferences and challenges in adopting digitalisation for their business.

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