MSME digitization is ticket to speedy recovery in 2021

Greater digitalization of micro, small, and medium-sized enterprises (MSMEs) could be the ticket to a speedy recovery of coronavirus-shaken economies in Asia-Pacific in 2021, according to the think tank Asian Development Bank Institute (ADBI).

In a recent podcast, ADBI dean and CEO Tetsushi Sonobe stressed the importance of MSMEs in reviving growth among the region’s developing economies.

He noted that in many developing economies in Asia-Pacific, MSMEs account for more than 90% of the number of business establishments, 50% to 80% of employment, and 30% to 60% of GDP.

“Their continued health is accordingly important to the developing economies in the region.”

He added that as an impact of the COVID-19, the majority of MSMEs are struggling to survive, while others have been devastated.

Tetsushi said the pandemic has shown how useful digital technologies are, and how platforms have been making digital technologies more user-friendly.

“The vast majority of small firms are willing to increase the use of e-commerce platforms and digital or mobile pay platforms. This was confirmed by our survey of small businesses. But they have not started a full-scale use of digital technologies in their production activities and labor management yet.”

On what governments can do to help struggling MSMEs, Tetsushi said: “The best policy for small firms is to help them survive the pandemic and get off to a good start when the pandemic comes to an end. In other words, the best policy is to help small firms avoid cash shortage and large interest payments.”

Tetsushi added that other favorable policies will also be helpful. These include providing liquidity and maintaining low interest rates as well as giving interest subsidies to small firms.

Results of surveys conducted last year by ADB on the immediate impact of COVID-19 on MSMEs in developing Asia found that as a result of the pandemic, MSMEs in all observed countries, including the Philippines, “faced a serious lack of funds to retain their business.”

As to sustainable development of small firms, “the government should have a long-term plan for digital infrastructure development that alleviates the digital divide and protects people from cyber-crimes and helps the sound digital transformation of the economy,” he said.

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