ASIAN DEVELOPMENT BANK REPORT HIGHLIGHTS KEY ROLE OF MSMEs IN PACIFIC ECONOMIC RECOVERY

Micro, small, and medium-sized enterprises (MSMEs) have been instrumental in driving economic recovery in Asia and the Pacific during and after the COVID-19 pandemic, according to a new report released by the Asian Development Bank (ADB). The Asia Small and Medium-Sized Enterprise Monitor 2023 emphasizes that providing policy and data support to MSMEs can further enhance their role as drivers of future growth.

The report underscores several key factors that can contribute to creating a conducive environment for MSMEs to thrive and foster inclusive and sustainable growth. These factors include the formalization of small businesses, reskilling and upskilling of workers, integration of digital tools and technology, economic diversification, and increased access to new and innovative financing.

“Job creation is a critical challenge for Asia and the Pacific,” stated 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.”

MSMEs continue to play a crucial role in the region’s growth dynamics, accounting for an estimated 96.6% of all enterprises, 55.8% of the workforce, and 28% of economic output on average across 24 ADB developing member countries through 2022.

The report highlights the importance of addressing challenges faced by MSMEs, such as low business diversification, limited access to formal financial services, and the need for digital transformation. While digitalization offers growth opportunities for small businesses, challenges include underdeveloped infrastructure, limited e-payment options, regulatory frameworks, and digital literacy.

In terms of financing, the report suggests that broadening alternative options, especially digital financial services, can provide essential growth capital for innovative small firms and startups, contributing to the development of a robust entrepreneurial base.

However, the Pacific region faces unique challenges, such as limited data infrastructure. The report recommends establishing a regularly updated database to map the MSME landscape in the Pacific, enabling evidence-based policy design for MSME development