Resolving the chicken-and-egg issue in funding digital transformation

A RECENT survey on SMEs has shown that they are willing to turn to digital technologies but, 40 per cent of those surveyed are concerned with the costs. Given that digitalisation has become a lifeline for businesses to survive in the current volatile, uncertain, complex and ambiguous (VUCA) landscape, it is no wonder that more SMEs are looking to tap into financial support around digital initiatives.

Although Singapore is a well-established market, a significant number of companies are under-banked. Traditional bank financing methods are unfavourable to SMEs and digitised business: their method of underwriting means that businesses may not qualify for credit even though they may be well-founded. For instance, digitalised businesses may own fewer assets to put up for collateral. Furthermore, data points related to the productivity return on investment (ROI) of digitalisation tend to be ignored in most underwriting processes, even though they are tangible metrics.

We see that Singapore startups and SMEs are stuck in a chicken-and-egg situation when it comes to seeking financing for digital initiatives. As such, it is great that the Government is paving the way to relook at how financing and credit are being granted.