Credit and finance for MSMEs: “Nearly half of the SMEs and about a third of large firms in emerging and developing Asia report difficulty in obtaining financing as the major impediment to technology adoption,” said RBI’s Michael Debabrata Patra.
Credit and finance for MSMEs: Addressing an event on economic productivity growth at the Asia KLEMS Conference on Sunday, Michael Debabrata Patra, Deputy Governor, Reserve Bank of India (RBI) highlighted the significance of access to capital for small and medium enterprises (SMEs) to support productivity growth of developing economies like India. “Easing and expanding access to finance for SMEs can generate productivity bursts, especially in emerging, developing economies,” Batra said. Asia KLEMS is an Asian regional research consortium to promote building database and conduct international productivity comparisons among Asian countries.
Patra also noted the role of digital technology adoption “as argued by the OECD (Organisation for Economic Co-operation and Development), digital technologies are transforming our economies and seem to offer a vast potential to enhance the productivity of firms.”
However, access to cutting-edge technologies remains uneven among countries and between firms – nearly half of the SMEs and about a third of large firms in emerging and developing Asia report difficulty in obtaining financing as the major impediment to technology adoption, he added explaining reasons for productivity slowdown in the region.
Patra maintained that raising productivity will need a sufficiently large stock of the new capital, and complementary business process changes involving human capital while organisational changes in investment decisions have to be in place to integrate it into production in order to harness its benefits.
As a multi-pronged approach required to reignite and sustain productivity growth, Patra suggested a number of measures. First, emerging and developing economies will need to leverage the potential of the services sector to drive productivity growth. Second, investing in ICT infrastructure, securing reduction in trade costs like those associated with shipping, logistics and regulation and supportive business-enabling reforms could help to engage the private sector in partnering in this endeavour. Third, raising labour force participation rates, especially among women and older workers, could also boost productivity, but this will require investments in workability, retraining and acquisition of new skills in step with changing technology.