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Micro, small, and medium enterprises (MSMEs) are the backbone of the Asian economy, accounting for an average of 97% of all enterprises and employing 67% of the national labor force.
In countries like Bangladesh and the Philippines, MSMEs generate over 80% and 65% of total employment, respectively. MSMEs create jobs, reduce poverty, foster innovation, and enhance regional development.
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However, Asian MSMEs face challenges that limit their growth and competitiveness, such as low access to the market, technology, finance, and value chain integration. In this post, we will explore these challenges in detail and provide some solutions and best practices to help MSMEs in Asia overcome them and thrive in the global economy.
Challenge 1: Inaccessibility of Market and Tools
One of the significant challenges MSMEs face in Asia is the lack of access to local and global markets. According to a 2022 study by the International Chamber of Commerce, only 18% of Southeast Asian MSMEs reported having access to sufficient financing, compared to 34% of large firms. MSMEs often face barriers such as high tariffs, non-tariff measures, trade facilitation issues, and lack of information and networks that prevent them from expanding their market reach and increasing their exports.
Solution 1: Leverage E-commerce and Digital Platforms
One of the ways that MSMEs in Asia can overcome the challenge of market inaccessibility is by leveraging e-commerce and digital platforms. E-commerce and digital platforms can help MSMEs reach new customers, reduce transaction costs, increase transparency, and improve customer service. According to a 2020 report by the Asian Development Bank, e-commerce sales in Asia and the Pacific reached $2.5 trillion in 2018, accounting for 50% of the global total. E-commerce and digital platforms can also help MSMEs access global value chains, which are the networks of activities and actors involved in producing and delivering a product or service to customers. By participating in global value chains, MSMEs can access new technologies, skills, and markets and enhance their productivity and competitiveness.
Some examples of e-commerce and digital platforms that MSMEs in Asia can use are:
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Facebook and Instagram are two of the most popular and widely used social media apps worldwide, with billions of monthly active users. They offer a variety of features and tools that can help MSMEs promote their products and services, such as pages, ads, shops, stories, reels, and live. MSMEs can also interact with their customers, get feedback, and build loyalty using these platforms.
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Shopify and WooCommerce are two leading e-commerce platforms allowing MSMEs to create and manage online stores. They offer a range of features and functionalities, such as themes, plugins, payment gateways, inventory management, analytics, and customer support. MSMEs can also integrate their online stores with other platforms like Facebook, Instagram, Amazon, and Google.
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Alibaba and Lazada are two of the largest e-commerce platforms in Asia, with millions of buyers and sellers across the region. They offer various services and solutions, such as sourcing, logistics, marketing, and financing. MSMEs can also join their programs and initiatives, such as Alibaba's eFounders Fellowship and Lazada's LazMall, to access training, mentorship, and resources.
Challenge 2: Low Access to Technology
Another challenge faced by MSMEs in Asia is the low access to technology. Technology is crucial to MSMEs' innovation, efficiency, and competitiveness. However, many Asian MSMEs lack the resources, skills, and awareness to adopt and use technology effectively. According to a 2022 study by the International Chamber of Commerce, while 80% of surveyed enterprises have expanded their use of digital tools in the past two years, many continue to be hampered by affordability gaps and low digital literacy rates.
Solution 2: Invest in Digital Transformation and Skills Development
One of the ways that MSMEs in Asia can overcome the challenge of low access to technology is by investing in digital transformation and skills development. Digital transformation uses digital technologies to create or modify existing business processes, products, and services. Digital transformation can help MSMEs improve their operational efficiency, customer experience, and competitive advantage. Skills development is enhancing the workforce's knowledge, abilities, and competencies. Skills development can help MSMEs improve their human capital, innovation capacity, and productivity.
Some examples of digital transformation and skills development initiatives that MSMEs in Asia can benefit from are:
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Google for MSMEs: This is a program by Google that provides free tools, training, and resources to help MSMEs grow their online presence and business. MSMEs can access Google's products and services, such as Google My Business, Google Ads, Google Analytics, Google Workspace, and YouTube. MSMEs can also access Google's training and certification programs like Google Digital Garage, Google Primer, and Google Skillshop.
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Microsoft for MSMEs: This is a program by Microsoft that provides affordable and accessible technology solutions and support to help MSMEs accelerate their digital transformation. MSMEs can access Microsoft's products and services, such as Microsoft 365, Microsoft Azure, Microsoft Dynamics 365, and Microsoft Power Platform. MSMEs can also access Microsoft's training and education programs, such as Microsoft Learn, Microsoft Virtual Academy, and Microsoft Partner Network.
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AWS for MSMEs: The Amazon Web Services (AWS) program provides cloud computing solutions and support to MSMEs to scale their business and innovate faster. MSMEs can access AWS's products and services, such as AWS Cloud, AWS Marketplace, AWS Activate, and AWS Solutions. MSMEs can also access AWS's training and certification programs, such as AWS Training and Certification, AWS Educate, and AWS Academy.
Challenge 3: Low Access to Finance
A third challenge MSMEs face in Asia is the low access to finance. Finance is essential for MSMEs to start, operate, and grow their business. However, many Asian MSMEs face difficulties accessing finance due to various barriers, such as lack of collateral, high transaction costs, and information asymmetry. As most Asian countries are bank-dominant economies, capital market financing is not a realistic option for MSMEs. According to a 2020 report by the Asian Development Bank, the SME financing gap in Asia and the Pacific was estimated at $1.5 trillion in 2018, or 15% of the region's GDP.
Solution 3: Explore Alternative Financing Options and Support Programs
One of the ways that MSMEs in Asia can overcome the challenge of low access to finance is by exploring alternative financing options and support programs. Alternative financing options are non-traditional sources of funding that can complement or substitute bank financing. Support programs are initiatives by governments, multilateral organizations, or private sector entities that can facilitate or enhance MSMEs' access to finance.
Some examples of alternative financing options and support programs that MSMEs in Asia can use are:
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Crowdfunding and Peer-to-Peer Lending: These online platforms connect MSMEs with individual or institutional investors willing to fund their projects or businesses. Crowdfunding and peer-to-peer lending can help MSMEs raise capital quickly, easily, and flexibly without collateral or intermediaries. Some examples of Asian crowdfunding and peer-to-peer lending platforms are Kickstarter, Indiegogo, Kiva, and Funding Societies.
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Venture Capital and Angel Investing: These forms of equity financing provide MSMEs with capital in exchange for a share of ownership or profits. Venture capital and angel investing can help MSMEs access funding, expertise, mentorship, and networks. Some examples of venture capital and angel investing firms and networks in Asia are Sequoia Capital, 500 Startups, Golden Gate Ventures, and AngelList.
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Credit Guarantee Schemes and Microfinance Institutions: These mechanisms provide MSMEs with access to bank loans by reducing the risk for lenders. Credit guarantee schemes are arrangements where a third party (usually a government or a multilateral organization) agrees to cover part or all of the losses in case of default by the borrower. Microfinance institutions provide small loans and other financial services to low-income individuals or groups. Some examples of credit guarantee schemes and microfinance institutions in Asia are the Credit Guarantee and Investment Facility, the Asian Development Bank, the Grameen Bank, and the BRAC Bank.
Challenge 4: Low Participation in Value Chain Integration
A fourth challenge MSMEs face in Asia is the low participation in value chain integration. Value chain integration is the process of linking MSMEs with larger enterprises or organizations that are involved in the same or related industries. Value chain integration can help MSMEs access new markets, technologies, and skills, enhancing their productivity and competitiveness. However, due to various barriers, such as lack of information, finance, technology, and standards, the participation of MSMEs in value chain integration is low in many Asian countries. According to the Asian Development Bank, only 30% of Asian SMEs are integrated into global value chains, compared to 60% in Europe.
Solution 4: Strengthen Collaboration and Coordination among Stakeholders
One of the ways that MSMEs in Asia can overcome the challenge of low participation in value chain integration is by strengthening collaboration and coordination among stakeholders. Stakeholders are the individuals or groups with an interest or influence in the MSME sector, such as governments, multilateral organizations, private sector entities, civil society organizations, and MSME associations. By collaborating and coordinating, stakeholders can create a conducive environment for MSMEs to integrate into value chains, providing policy support, technical assistance, market linkages, and capacity building. Some examples of collaboration and coordination initiatives among stakeholders in Asia are:
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The Asia-Pacific MSME Trade Coalition (AMTC): This network of MSME associations and chambers of commerce from 17 countries in the Asia-Pacific region aims to advocate for the interests and needs of MSMEs in trade and digital policy. The AMTC also provides information, resources, and opportunities for MSMEs to engage in regional and global trade.
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The ASEAN Coordinating Committee on MSMEs (ACCMSME): This is a committee that coordinates and implements the ASEAN Strategic Action Plan for SME Development 2016-2025, which is a framework that guides the efforts of ASEAN member states to enhance the competitiveness and resilience of MSMEs in the region. The ACCMSME also collaborates with various partners, such as the ASEAN Business Advisory Council, the Japan-ASEAN Integration Fund, and the German Development Cooperation, to support and assist MSMEs in ASEAN.
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The Asian Development Bank and the Asian Development Bank Institute: These are two institutions that provide financial and technical support to MSMEs in Asia, especially in digital transformation, value chain integration, and green growth. The ADB and the ADBI also conduct research, policy dialogue, and capacity development activities to promote the development of MSMEs in Asia.
How ASilva Innovations Can Help MSMEs in Asia
ASilva Innovations is a company that provides innovative solutions and services to help MSMEs in Asia overcome their challenges and thrive in the global economy. ASilva Innovations utilizes the power of artificial intelligence (AI), data analytics, and digital platforms to help MSMEs access market information, quality standards, logistics services, and trade finance through a single interface.
ASilva Innovations also offers innovation consulting services, performance analysis, automated skills enhancement, streamlined marketing, efficient CRM and inventory management, and mobile app development to help MSMEs optimize their operations, productivity, and profitability. Some of the benefits of working with ASilva Innovations are:
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Customized solutions: ASilva Innovations tailors its solutions and services to meet each MSME client's specific needs and goals.
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Affordable prices: ASilva Innovations offers competitive and flexible pricing options that suit the budget and capacity of MSMEs.
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Expert team: ASilva Innovations has a team of experts with extensive experience and knowledge in MSME development, digital transformation, and global value chains.
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Trusted partner: ASilva Innovations has established partnerships with various stakeholders, such as governments, multilateral organizations, private sector entities, and MSME associations, to provide comprehensive and coordinated support to MSMEs.
Conclusion
MSMEs are the backbone of the Asian economy, contributing to local resilience and economic complexity. However, MSMEs also face challenges that limit their growth and competitiveness, such as low access to the market, technology, finance, and value chain integration.
To overcome these challenges, MSMEs must leverage e-commerce and digital platforms, invest in digital transformation and skills development, explore alternative financing options and support programs, and strengthen stakeholder collaboration and coordination. ASilva Innovations is a company that provides innovative solutions and services to help MSMEs in Asia achieve these objectives and thrive in the global economy.
If you are an Asian MSME owner looking for ways to grow your business and reach new customers, don't hesitate to contact ASilva Innovations today. ASilva Innovations will provide a free consultation and a demo of their solutions and services. You can also sign up for online courses and learn more about their products and programs. ASilva Innovations is your trusted partner for MSME development and digital transformation. Contact them now and take your MSME to the next level.
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References
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ADB. (2015, October). Integrating SMEs into Global Value Chains: Challenges and Policy Actions in Asia. Retrieved from https://www.adb.org/publications/integrating-smes-global-value-chain
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ASilva Innovations (n.d.). ASilva Innovations Services. Retrieved from https://asilvainnovations.com/
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Laforga, B.(2020). Poor access to financing hampers MSME growth. Credit Information Corporation. Retrieved from https://www.creditinfo.gov.ph/businessworld-poor-access-financing-hampers-msme-growth
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DTI. (2022). 2022 Philippine MSME Statistics. Retrieved from https://www.dti.gov.ph/resources/msme-statistics/
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Hossain, S. (2022, June 27). Small enterprises are the pillars of sustainable growth in Bangladesh. Dhaka Tribune. https://www.dhakatribune.com/business/273367/small-enterprises-are-the-pillars-of-sustainable
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ICC. (2022, November 17). MSME digital exports in Southeast Asia: A study of MSME digital exports in 10 ASEAN markets. Retrieved from https://iccwbo.org/news-publications/policies-reports/msme-digital-exports-in-southeast-asia-a-study-of-msme-digital-exports-in-10-asean-markets/
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UNESCAP. (n.d). Overview of MSMEs in Asia-Pacific regions. Retrieved from https://msmepolicy.unescap.org/overview-msmes-asia-pacific-regions