Governments in Southeast Asia should support the development of small and medium enterprises (SMEs) by addressing challenges to access to finance to promote economic growth and reduce inequality, according to the Asian Development Bank Institute (ADBI).
In a working paper, the multilateral lender's think tank ADBI said a solid SME foundation is necessary to grow the economy and reduce inequality.
This, as it found SMEs actively contributed to reducing income disparity among individuals in Southeast Asian economies Indonesia, Thailand, Myanmar, Lao PDR, Cambodia, Vietnam, Malaysia and the Philippines, based on an analysis of the data on SMEs' contribution to gross domestic product, the total digital payment transaction volume, and economic inequality from 2010 to 2021.
It also found that digital payments are supporting SMEs' efforts to narrow the inequality gap within Southeast Asian countries.
As such, ADBI said economic policymakers should focus on creating formal financial markets to address financial challenges faced by SMEs.
'The development of a strong SME sector would be achieved, for example, from the simplification of lending processes, enforcement of credit rights, and a decrease in credit costs,' ADBI said.
In addition, it said an educated and technically proficient labor force would be needed to speed up the expansion of SMEs, as well as poverty reduction efforts.
'Policy efforts should prioritize eliminating difficulties and establishing innovative financial products that have a direct impact on the low-income consumer and those who have been excluded,' ADBI said.
It also said governments in Southeast Asia need to take steps to support the development of purposeful financial systems that can simultaneously enhance entrepreneurship and educational opportunities, align income with individual talents, and improve the demand for labor.
In almost all countries, it said SMEs account for 99 percent of enterprises.
As such, the SME sector is seen to play a key role both in economic growth and the job supply.
Copyright © 2022 PhilSTAR Daily, Inc Provided by SyndiGate Media Inc. (Syndigate.info).
The Philippine STAR