MSMEs are an important engine of economic growth and development due to their large share in total employment and their participation in production value chains and trade. However, they are often disadvantaged due to their small operational size and lack of financial resources, skills/knowledge, and outreach. Their disadvantages are associated, among other things, with poor access to markets; low bargaining power with customers and suppliers leading to low product prices, high costs and lower profits; weak organizational capacities and low-skilled human resources; inadequate institutional support and networking; and difficulties to access finance. With regard to the last point, governments and related agencies have devised mechanisms in recent decades to facilitate improved flows of finance to MSMEs, but many challenges remain.
MSMEs have been particularly vulnerable to the socio-economic crisis caused by the COVID-19 pandemic, as well as the policy responses enacted, and need supportive policy measures by state agencies to deal with it. Indeed, the virus has helped expose those vulnerabilities, as MSMEs typically lack the additional resilience that comes from operating at scale, nor do they have diversified business models that make it easier to pivot. It is perhaps worth noting that the virus itself did not actually cause the unprecedented economic downturn. Rather, governments made a strategic decision to shut down their economies, in order to battle the virus more effectively, rightly placing public health above economic well-being. The resulting economic crisis has been deliberately induced by policy-makers; a somewhat new phenomenon.
The book takes a broadly chronological approach to the topic, and each chapter focuses on different stages of the pandemic’s effect on MSME finance in Asia and the Pacific: before, during, after and beyond. The last two chapters include some specific recommendations and ‘take-aways’ that illustrate new and potential avenues of intervention for MSME finance in Asia and the Pacific.