KUALA LUMPUR: Malaysia’s microfinancing allocation under the 2027 Budget must do more than help small businesses survive, with greater emphasis needed on profitability, financial management and long-term sustainability, an economist said.
Universiti Malaya Ungku Aziz Centre for Development Studies research fellow Dr Nik Zirwatul Fatihah said government assistance could ease financial pressures on micro and small enterprises, but access to financing alone would not necessarily make them financially stronger.
She said the challenge was ensuring that businesses could translate financial assistance into lasting improvements rather than merely expanding their operations.
“Business growth and business sustainability are related, but they are not identical. Higher revenue does not automatically translate into greater profitability, while years of operation do not necessarily guarantee financial resilience,” she said in a statement.
The 2027 Budget provides RM6.6 billion in microfinancing and RM200 million under the Sejahtera Madani grants, which target 40,000 recipients, particularly women, through equipment and training assistance.
Nik Zirwatul said the initiatives recognised the financial and resource constraints faced by small entrepreneurs, particularly those struggling to improve productivity and expand their operations.
However, she cautioned that additional financing could also increase operating expenses without necessarily improving profitability.
She cited the example of a small restaurant securing financing to expand its business, only to face higher costs that could offset any increase in sales.
“Without proper pricing, cost management and cash flow planning, the owner could end up working harder without earning significantly more,” she said.
Nik Zirwatul said entrepreneurship assistance should also reflect the different needs of businesses rather than adopting a one-size-fits-all approach.
A home-based entrepreneur, for example, might require basic equipment and practical guidance, while an established retailer could benefit more from inventory management, financial planning and access to new markets.
She said the same principle should apply to digitalisation initiatives, as adopting technology did not automatically improve a company’s financial position.
“Technology creates value when it improves business performance, not merely when it is adopted,” she said.
Nik Zirwatul also called for more targeted entrepreneurship training, particularly for established business owners who might benefit more from practical financial management skills than introductory courses.
She said training in pricing, cash flow management, cost control and preparing for unexpected disruptions could help businesses strengthen their financial position.
Beyond the assistance provided, she said policymakers should reassess how the success of entrepreneurship programmes was measured.
Financing approvals, equipment distribution and training participation could indicate the reach of government initiatives, but did not necessarily demonstrate whether recipients had become financially sustainable.
“A stronger assessment would examine what happens afterwards. Have profit margins improved? Are entrepreneurs managing their finances more effectively?
“Can their businesses withstand weaker demand or unexpected expenses? Are they becoming less dependent on repeated financial assistance?” she said.
Nik Zirwatul suggested complementing financial assistance with needs-based mentoring, simple financial management tools and periodic business assessments.
Such measures, she said, could help entrepreneurs identify operational weaknesses, improve decision-making and reduce their dependence on repeated government support.
She also stressed that business sustainability should not be measured solely by expansion, as many small entrepreneurs prioritised stable incomes and financial security over opening additional outlets.
“For many, success means earning a stable income, supporting their families and operating without constant financial uncertainty,” she said.
Nik Zirwatul said the 2027 Budget presented an opportunity to strengthen Malaysia’s micro and small enterprises, but its long-term impact would depend on whether recipients achieved sustainable improvements in their businesses.
“Because the real measure of entrepreneurship support is not simply how many businesses it helps remain open today, but how many become strong enough to face tomorrow with greater confidence,” she said.