Ever since the founding of modern Singapore, Malay-Muslim (MM) entrepreneurs have continued to play a key part in the writing of the nation’s story. The combination of Indian-Muslim and Arab traders who entered the region in the search of new markets, together with the existing local Malays, saw the birth of a dynamic entrepreneurship ecosystem, that has continued to exist till today.
The MM business ecosystem continues to develop, supported by national pro- business policies. With Singapore being one of the most business-friendly places in the world, it is no surprise that many members of the community have undertaken their own entrepreneurial endeavour in one way or another. Much of the progress, especially in the last decade or so, can be seen in the following areas.
PARTICIPATION
With the advent of digitalisation, barriers to entry have been reduced, and typical roadblocks such as high start-up cost, sourcing for location, and even access to expertise have been overcome through the use of digital tools, which allow almost anyone to be able to start their own entrepreneurship venture in a matter of hours.
The MM community has seen a pick up in the number of businesses, which can be evidenced by the steady growth seen in membership of the Singapore Malay Chamber of Commerce and Industry (SMCCI), the apex business association for the MM community, whose rate has continued growing, peaking to nearly 1,000 just before the onset of the pandemic in 2020. The most recent Geylang Serai Bazaar in Ramadhan saw a total of over 700 stores open throughout the month, the largest it has ever been, supported by many other more regional bazaars which were open at the same time. Although the official number of MM-owned businesses are unknown (given that ACRA, the official business registry does not categorise businesses by race or ethnicity), these data point to the fact that there has been a growing rate of participation in entrepreneurship.
A key factor behind this participation is also the increased availability of platforms for entrepreneurs to participate in. Unlike the more brick-and-mortar set-ups which exist, there now exist more modular formats such as online campaigns, pop-up events and trade fairs, which do not require as much capital outlay. These remain a favoured format by MM entrepreneurs, who are able to gain first-hand experience of running a business, but without the risk that may come from embarking on such ventures, in a more traditional way.
DIVERSIFICATION OF BUSINESSES
In recent times, the MM community has also begun to show more diversification in the mix of businesses that its entrepreneurs participate in. Taking the SMCCI data, once again as a yardstick, approximately 46% of its membership are in two large sectors, namely food and beverage (F&B), typically at the retail end of the sector (i.e. running frontline services such as restaurants, catering, grab-and-go outlets) as well as lifestyle (i.e. fashion, textiles, Fast-Moving Consumer Goods).
In recent times there has been rapid growth in the professional services industry, with many entrepreneurs monetising their expertise in areas like branding and marketing, and financial services. Other areas that MM entrepreneurs have also shown growth in include areas like education, technology and logistics. This has resulted in growing accessibility to diverse sectors within the business landscape, which can only augur well for the future of MM entrepreneurship, as it would result in the creation of multiple avenues, networks, and possible mentors for budding entrepreneurs to access.
DIGITAL ADOPTION
The advent of the COVID-19 pandemic was imperative in accelerating the drive towards digitalisation, as many businesses rapidly used digitalisation as a tool towards sustaining business. In particular, e-commerce was an important enabler for businesses who had normally relied heavily on face-to-face business flow. With the inability to host customers on-site, many businesses began to adopt omni-channel approaches, by setting up digital footprints across multiple channels, which include traditional online (e.g. websites), social media (e.g. Facebook, Instagram) as well as e-commerce (e.g. Shopee and Lazada) channels.
A pioneering effort in 2021 was Bazaar Kita, which was an attempt by the SMCCI to provide a digital platform for the selling of Hari Raya goods. Together with tech giants such as Shopee and Grab, more than 100 merchants were onboarded, and able to transact more than $600,000 in goods across the month of Ramadhan.
As COVID-19 has continued to abate, the digitalisation drive has not stopped as MM businesses are constantly looking to ride on the next wave of online tools (e.g. TikTok shop) to further grow their business.
Notwithstanding, as the face of business continues to evolve, and especially so after the pandemic, the MM business ecosystem will continue to be faced with several structural issues that will need to be resolved so as to continue its upward trend.
POSITIONING ALONG THE VALUE CHAIN
The COVID-19 pandemic magnified the importance of positioning oneself within the value chain. Companies which were positioned further up the value chain were able to gain significant leverage in business deals, where else those further down the chain could only ultimately face the downstream impact of price changes, with little ability to influence the state of play.
For example, many companies in the interior design and/or construction sectors within Singapore, who had normally sourced for both manpower and materials from Malaysia, were significantly impacted as they were faced with the need to complete existing contracts, but with costs from Malaysia increasing rapidly. As such, many were forced to eat into their own profit margins to be able to complete contracts or face the potential consequences of breaching their contracts and having to pay damages. Similarly, many F&B companies were forced to eat into their already razor-thin margins due to increases in raw material and labour.
However, COVID-19 only served to cast the spotlight on what was already an existing problem within the ecosystem, which was that many MM businesses were placed too far down the value chain and could only become price-takers and not price-makers. With the inability to move up the value chain, the growth of these businesses is limited in nature and are extremely exposed to shocks in demand and supply. With the prospect of continued inflation, geopolitical headwinds, as well as world events (e.g. Ukraine crisis), prices are expected to continue rising and as such, MM businesses, most of which exist in the last mile of the value-chain (i.e. the last leg of the chain dealing most directly with the end-consumer) will continue to face issues with increasing their profit margins, which in turn, will impact their long-term sustainability and growth.
Structurally, businesses in Singapore, by virtue of the lack of a natural hinterland or natural resources, position themselves in the middle or end of the value chain. The set-up of manufacturing facilities within Singapore remains a challenging task, due to the high costs of land, machinery, and manpower. As such, larger companies in Singapore have begun to ‘nearshore’ their manufacturing, by looking at nearby areas such as Batam (in Indonesia) and Iskandar (in Malaysia) as potential areas to manufacture, leveraging on the existing ecosystem that have been purpose-built in these areas to keep costs low, while staying in control of their own value-chain, so as to be able to manage costs. This can be a practice that can be considered by MM companies, as they attempt to position themselves further up the value-chain, which in itself is a challenging feat.
ACCESS TO CAPITAL
The reality of business is that it does take money, to make money. This uncomfortable truth is something that has to be confronted by MM businesses should they wish to accelerate their growth – especially so in a dynamic post-COVID world, which has shorter business cycles, and which requires access to capital, so as to continue staying competitive.
Capital can be accessed in several ways. The first and most common would be through financing via a loan. There exist many options today, be it through more traditional means (e.g. banks) or through other means such as peer-to-peer (P2P) funding. Such an arrangement will not require the business to give up equity but will require the risk to be borne largely by the business, although some schemes under the ambit of government agencies do allow some co-sharing of risk.
Another way to access capital is through raising funds through investors, who in turn will take some form of equity in the company, in exchange for the provision of funds. In this case, the risk will be co-shared between the investor and business-owner, with the amount of equity typically being derived as a function of the performance of the business (both current and future) and amount of funding provided.
In both these cases, MM businesses have found it to be challenging to access funds, due to several reasons. The first, which is a common problem for smaller businesses, is having a robust system of recording their financial transactions, thus being able to give the potential lender or investor, a clear idea of the state of the company’s financial health, which is an important piece of information needed for such benefactors. Common problems include the inability to meticulously record all transactions, co-mingling of business and personal finances, as well as the lack of systematic pricing.
The second would be the lack of halal or Syariah-compliant instruments that can be used for the lending of monies. With traditional interest-based lending being the norm in this part of the world, MM entrepreneurs who are eager to get financing may be faced with such a stumbling block. Although there exist some options within the local ecosystem, common feedback from MM businesses is that terms for such options are often unfavourable as compared to conventional ones. Faced with this conundrum, MM businesses may decide to take up neither
Thirdly, business models of MM businesses often face the challenge of being scalable enough for investors to be attracted to. A key decision-making point for investors is often how much scope a business can grow and provide a significant return on investment (ROI). In common sectors for MM businesses such as F&B and retail, scalability is often an issue as any expansion is often based upon greater capital expenditure, which in itself is not a sustainable model.
However, the lack of access to capital is not something that is only related to material resources, but also something more intangible – equally lacking is social capital. As the saying goes, your network is your net worth, which suggests that the more people one knows, the more one will be worth. However, to be more accurate, the function of this worth is not only based on the number of people one knows, but the quality of the people one knows. A simple cursory search within key business networks such as representation at various trade associations, key positions within multinational companies (MNCs) at both executive and board levels, as well as public agencies, show a clear dearth of MM representation which has a downstream impact on the MM business ecosystem. This creates less opportunity for MM entrepreneurs to get access to crucial networks to key opinion leaders and personalities such as potential investors, legislators and overseas markets, among others. This is especially important as the community continues to expand its wings, through the diversification of business mix into more nascent industries.
RIDING THE NEW WAVE OF BUSINESS
With the continuing development of the business ecosystem, and even with the increased push for diversification, challenges continue to exist in terms of businesses participating in the new economy.
Through Southeast Asia (SEA), two trends in business will continue to grow in the short to medium term, which is the digital economy, and the green economy. In both these areas, capital inflows continue to pour into Singapore, with many venture capital and private equity firms looking for the next big thing that is in need of capital to accelerate its growth.
However, the presence of businesses in these sectors remains limited, as they are something less familiar, as compared to the more traditional sectors. Areas such as Artificial Intelligence, Data Analytics and Augmented Reality, as well as Renewable Energy, Green Mobility and Smart City Development are normally not closely associated to MM companies, yet have tremendous potential for businesses to grow into.
Until MM businesses are able to develop the capabilities and courage to enter such sectors, growth will remain limited.
THE JOURNEY TO GROWTH CONTINUES
However, the pace of development that the MM business ecosystem has shown over the past 10 years, and the sheer resilience these businesses have shown through a generational crisis such as COVID-19, bring with them some promise for the future.
The MM community continue to showcase their talents in the business world, with many new entrants in both traditional and nascent sectors. Be it as a vendor at the annual Ramadhan Bazaar, or in the corridors of Block 71 (Singapore’s famous tech startup enclave), one will see many young members of the MM community applying themselves, in a bid to build their business. If anything, the zeal to try our hand at entrepreneurship remains something permanent, ever since the earliest days of the founding of modern Singapore.
Entrepreneurship serves two important calls that members of the MM community resonate with; the first of which, as an important vehicle towards economic empowerment, and with it, social mobility. Secondly, it gives the opportunity for us to serve others, while earning our keep in life. Both these factors are something closely integrated in the fabric of our community, and with that, the spirit of entrepreneurship will continue to be strong.
What is left, is to find ways to accelerate the growth of the MM business community, which will require us to confront and accept some hard but necessary truths. ⬛
Azrulnizam Shah Sohaimi was the Executive Director of the Singapore Malay Chamber of Commerce & Industry (SMCCI) from 2017 to 2022. He currently works in the public service, as part of the enterprise development ecosystem.
