ESCAP’s MSME Financing Series

Micro, Small and Medium-sized Enterprises’ Access to Finance in Asia and the Pacific

In the developing countries of Asia-Pacific region, micro, small and medium-sized enterprises (MSME) represent, on average, 96 per cent of all enterprises, 62 per cent of the labour force and 42 per cent of the GDP. Their development, both through the growth of individual businesses and through the emergence of new start-ups, contributes significantly to economic growth, the creation of jobs, and the development of skills.

MSMEs, However, are often constrained in their access to finance. In the microenterprise segment, microfinance institutions usually provide group loans, following the approach pioneered by Grameen Bank in the 1980s, but the size of these loans is often insufficient for microenterprises willing to expand their operations. In the small and medium enterprise (SME) segment, businesses often have difficulties to obtain loans from commercial banks because they are perceived as too risky or involving high transaction costs. It is not surprising, then, that the amount of financing obtained by MSMEs in the median developing country of Asia and the Pacific represents only 30 per cent of the amount they need.

ESCAP’s MSME financing series

To better understand the challenges of MSMEs to access finance and the key mechanisms and strategies that can help them, ESCAP developed A Framework for Country Studies on MSME Access to Finance in Asia and the Pacific and prepared a series of detailed national studies based on it. So far, studies have been prepared for Cambodia, Nepal, Samoa and Bangladesh. The studies were prepared by independent experts engaged by ESCAP and guided by advisory committees composed of representatives from government departments and agencies, as well as private sector organizations and financial institutions, involved in MSME promotion and financing.

The national studies have contributed to ESCAP’s capacity building activities in the countries where they were implemented. In some cases, the studies are contributing to the discussions of new government policies that incorporate some of their recommendations. The studies will be reflected on a new ESCAP’s publication on MSME finance and the COVID-19 crisis to be released at the end of this year, and they will contribute to a global, multi-agency project on MSMEs led by UNCTAD and ESCWA, which also addresses the impact of COVID-19 on the sector.