Build to Last — Shaping MSMEs’ Growth in the Digital Age

TFGI’s workshop with the Asian Development Bank on 17 March 2022 explored MSMEs’ digitalisation journeys thus far, and the challenges and opportunities as they navigate the digital age.

MSMEs (micro, small and medium enterprises) are regarded as the backbone of ASEAN’s economy given their significant contribution to the region’s employment and GDP. With at least 71 million MSMEs in Southeast Asia, experts have predicted that helping these small businesses build back better would greatly aid the region’s post-pandemic recovery. 

The pandemic has only accelerated the arrival of the digital economy; the gross merchandise value of Southeast Asia’s Internet Economy is projected to hit $1 trillion by 2030. This opens up MSMEs to numerous opportunities such as reaching a wider consumer base and improving business acumen through data collection. However, MSMEs face various hurdles when accessing the digital economy; the Tech For Good Institute’s (TFGI) 2021 Southeast Asia Platform Economy report found that only 1 in 5 MSMEs are on O2O (online-to-offline) platforms due to issues such as lacking digital infrastructure and lack of traditional financial support. 

TFGI’s workshop with the Asian Development Bank on 17 March 2022 opened a dialogue between industry stakeholders regarding ensuring the sustainable and inclusive growth of MSMEs in this digital age. Speakers discussed opportunities for collaboration among the public and private sectors to overcome challenges faced by MSMEs as well as to boost their growth.  

Speakers included: 

Here are four takeaways from the dialogue: 

  • There is a need to improve on, and spread awareness of, capacity building programmes. To address the spectrum of MSMEs in Southeast Asia, capacity building programmes have to follow regulatory frameworks which are ideally regionally coherent. While there are numerous capacity building programmes available, they need to be made accessible to all MSMEs especially since Southeast Asia is a very diverse region. This includes ensuring that such programmes are available in the various indigenous languages of the region, and ensuring that MSMEs in rural areas are still accounted for. For instance, the Asian Development Bank collaborated with Cantilan Bank, one of the leading rural banks in the Philippines, on a pilot project to use cloud-based core banking technology.
  • Identify and understand the diverse needs of various groups of MSMEs. While addressing the physical hurdles of the digital economy is important, industry stakeholders have to also assess the larger picture and how other factors may impact behavioural attitudes in adopting digital technology. This is especially important considering the diverse nature of MSMEs in such a large region. Segmentation of MSMEs allows for better understanding of their needs, and how best to serve them. An example would be how the care economy is related to the digital economy; a study conducted by UN Women found that, during the pandemic, women spent three times as much as men on domestic chores and unpaid care work, resulting in a heavy mental load that prevented them from being able to focus on their careers. This inspired UN Pulse Lab Jakarta to use behavioural economics to analyse women necessity business owners in Indonesia. They created four archetypes of women necessity business owners to explain their current methods of adopting digital technologies, and raised tailored suggestions on how to cater to these groups. 
  • Use technology to streamline processes and standardise markets. Despite digital toolkits increasingly being made available, the MSME landscape still suffers from being overly fragmented, with some industries lacking standardisation, resulting in inefficiency and loss of business opportunities. For instance, Logivan, the largest truck-matching platform in Vietnam, serves its $25 billion trucking industry by enabling truck drivers and MSME trucking companies to have better access to business information and opportunities. Previously, the matching process was done via brokers and manual calling, resulting in information asymmetry that caused inefficiencies in the market, with over 70% of truck returns being empty. This led to high logistics costs in Vietnam, which is roughly 21% of its GDP. Logivan addresses this issue by standardising the trucking market and its related processes, allowing trucking companies to leverage digital tools to improve their business.
  • Regional collaboration on transboundary challenges can boost overall MSME growth in ASEAN. The region faces transboundary obstacles; as the digital economy grows, issues such as data protection and cybersecurity become all the more prominent. To allow MSMEs to fully benefit from the wider consumer base as a result of the digital economy, there needs to be regional discussion regarding individual laws and policies surrounding such issues to reduce divergence without affecting sovereignty and security. These iterative processes in policy development have to be set up to allow cross-border data flows such that MSMEs can enjoy regional transactions in a standardised landscape that is easy to navigate. This can be done via regulatory sandboxes via public-private partnerships that allows for data collection and policy-level implementation.  

Catch up on the workshop below: 

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Mouna Aouri

Programme Fellow

Mouna Aouri is an Institute Fellow at the Tech For Good Institute. As a social entrepreneur, impact investor, and engineer, her experience spans over two decades in the MENA region, South East Asia, and Japan. She is founder of Woomentum, a Singapore-based platform dedicated to supporting women entrepreneurs in APAC through skill development and access to growth capital through strategic collaborations with corporate entities, investors and government partners.

Dr Ming Tan

Founding Executive Director

Dr Ming Tan is founding Executive Director for the Tech for Good Institute, a non-profit founded to catalyse research and collaboration on social, economic and policy trends accelerated by the digital economy in Southeast Asia. She is concurrently a Senior Fellow at the Centre for Governance and Sustainability at the National University of Singapore and Advisor to the Founder of the COMO Group, a Singaporean portfolio of lifestyle companies operating in 15 countries worldwide.  Her research interests lie at the intersection of technology, business and society, including sustainability and innovation.

 

Ming was previously Managing Director of IPOS International, part of the Intellectual Property Office of Singapore, which supports Singapore’s future growth as a global innovation hub for intellectual property creation, commercialisation and management. Prior to joining the public sector, she was Head of Stewardship of the COMO Group and the founding Executive Director of COMO Foundation, a grantmaker focused on gender equity that has served over 47 million women and girls since 2003.

 

As a company director, she lends brand and strategic guidance to several companies within the COMO Group. Ming also serves as a Council Member of the Council for Board Diversity, on the boards of COMO Foundation and Singapore Network Information Centre (SGNIC), and on the Digital and Technology Advisory Panel for Esplanade–Theatres on the Bay, Singapore’s national performing arts centre.

 

In the non-profit, educational and government spheres, Ming is a director of COMO Foundation and Singapore Network Information Centre (SGNIC) and chairs the Asia Advisory board for Swiss hospitality business and management school EHL. She also serves on  the Council for Board Diversity and the Digital and Technology Advisory Panel for Esplanade–Theatres on the Bay, Singapore’s national performing arts centre.

 

Ming was educated in Singapore, the United States, and England. She obtained her bachelor’s and master’s degrees from Stanford University and her doctorate from Oxford.