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Policy and data support can boost MSMEs’ role as drivers of future growth: ADB report

As per the report, the average lending to MSMEs in these countries was 10.6 per cent of the country’s gross domestic product and 22 per cent of total bank lending in the developing countries of the Asia-Pacific region. ADB emphasizes developing digital financial solutions for small businesses and startups. 

Policies for MSMEs: Providing policy and data support to micro, small and medium enterprises can boost their role as drivers of growth in the economy, according to Asia Small and Medium-sized Enterprise Monitor 2023, published today by the Asian Development Bank. Further, it states that the MSME sector played a vital role in the recovery of the economies of Asia and the Pacific region. 

According to the report, initiatives such as “the formalization of small businesses, reskilling, and upskilling of workers, along with the integration of digital tools and technology, economic diversification, and increasing access to new and innovative financing can create a fertile environment” for these businesses to contribute to sustainable growth. 

“Job creation is a critical challenge for Asia and the Pacific,” said ADB Chief Economist Albert Park. “In the Pacific, remittances sent by emigrants to advanced economies can support small businesses and create employment opportunities for women and younger workers. Tourism and agribusiness—where MSMEs actively participate—drive Pacific economies. Their sustainable growth helps strengthen MSME dynamism and raises national productivity.”

According to the ADB’s data from 24 emerging economies from 2022, MSMEs constituted 96.6 per cent of all enterprises, 55.8 per cent of the workforce, and 28 per cent of the economic output on average of all the countries. 

As per the report, the average lending to MSMEs in these countries was 10.6 per cent of the country’s gross domestic product and 22 per cent of total bank lending in the developing countries of the Asia-Pacific region. ADB emphasizes developing digital financial solutions for small businesses and startups. 

The report attributes the low business diversification as the barrier to the country’s growth potential and calls for innovation in startups and small firms. Other factors such as lack of digitization, underdeveloped infrastructure, limited e-payments, and a lack of a supportive legal framework restrict the growth of small enterprises. 

Stating the poor digital infrastructure in the Pacific region, ADB said that the lack of key data makes it difficult for policymakers to design MSME-specific policies. Hence, regularly updated data on MSMEs is required for the region. 

Established in 1966, Asian Development Bank works towards the socio-economic development of the Asian region, with 68 member nations.