Policy, Data Support Key To Boost MSMEs: ADB Report

The Asian Development Bank has emphasized providing policy assistance and data support to micro, small, and medium enterprises (MSMEs) to enhance their capacity as drivers of economic growth. In the recently released report, the Asian Small and Medium-sized Enterprise Monitor 2023, the ADB highlighted the significant contribution of the MSME sector in the economic recovery of Asia and the Pacific region.

As per the report's findings, creating an enabling environment for small businesses to thrive and contribute to sustainable growth involves “formalizing small enterprises, enhancing the skills of the workforce through reskilling and upskilling, integrating digital tools and technology, diversifying the economy, and improving access to innovative financing solutions.”

ADB Chief Economist Albert Park said, “Job creation is a critical challenge for Asia and the Pacific.” “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,” he added.

Based on data provided by the Asian Development Bank from 24 emerging economies in 2022, on average, MSMEs constituted a significant portion of the business landscape. These enterprises represented 96.6 per cent of all businesses, employed 55.8 per cent of the workforce, and contributed to 28 per cent of the total economic output across these countries.

The report also highlighted that the average lending to MSMEs in these nations amounted to 10.6 per cent of the country's GDP and accounted for 22 per cent of the overall bank lending within the Asia-Pacific region's developing economies. The Asian Development Bank underlined the importance of developing digital financial solutions for small businesses and startups.

Various Growth Barriers

Citing low business diversification as the barrier to the country’s growth prospect, the report has called for innovation in startups and small enterprises. It also pointed out several other factors hindering the growth of small businesses, including inadequate digitization, underdeveloped infrastructure, limited electronic payment systems, and the absence of a supportive legal framework.

The Asian Development Bank highlighted the poor digital infrastructure in the Pacific region, stating that the absence of essential data makes it challenging for policymakers to formulate targeted policies for MSMEs. Therefore, it emphasized the necessity for regularly updated data specific to the region's small and medium enterprises.

Earlier this year, a report jointly released by SIDBI and TransUnion CIBIL showed that the number of micro, small, and medium enterprises (MSMEs) in India is projected to increase from 6.30 crore to approximately 7.50 crore in the near future. Of the existing 6.30 crore MSMEs, only 2.50 crore (39.68 per cent) have accessed formal credit sources.

The Asian Development Bank, established in 1966 and comprising 68 member nations including India, is dedicated to advancing the social and economic development of the Asian region.

The Asian Development Bank's report underlines the pivotal role of micro, small, and medium enterprises (MSMEs) in country’s economic revival. It emphasizes the need for supportive policies, enhanced digitalization, and diversified economic growth to make these businesses productive. By addressing barriers and providing adequate support, full potential of the MSME sector can be harnessed.