Digital Finance is a Boost for MSMEs in Asia, New Study Finds

ADBI News Release | 22 January 2025

A new study from ADBI and the Cambridge Centre for Alternative Finance (CCAF) has found that digital finance providers enhance access to credit for businesses and improve business performance in Asia, particularly for micro, small and medium enterprises (MSMEs) in emerging markets and developing countries.

Free to access and download, MSME Access to Digital Finance Study: In Selected EMDE Countries in Asia offers valuable data and insights into how MSMEs use digital finance channels to meet their financial needs and how digital finance has empowered their financial journey.

This empirical study is based on survey responses from 819 MSME users of digital finance platforms operating across Bangladesh, the People’s Republic of China, India, Kazakhstan, Mongolia, Pakistan and Viet Nam.

Around 80% of businesses reported increased revenue, profit/net income, and customer base – business expansion, asset purchases, and increased inventory/ raw materials enhanced business performance. Notably, most businesses managed to repay loans with an overall default rate of less than 1%.

“Fintech companies are providing innovative and tailored products and services catering to the needs of MSMEs, thereby addressing some of the credit constraints, particularly in EMDEs,” said Pavle Avramovic, Head of Market and Infrastructure Observatory at the CCAF.

Overall, the loan values among MSMEs were low and were primarily borrowed to meet short-term financial needs such as payment to suppliers, purchase of raw materials, and to cover unexpected business cash flow needs, such as customer defaults.

When choosing digital finance providers business users were strongly influenced by better customer service, better approval rates, speed in receiving funds, simplified application process, and flexible payment terms.

The findings indicate no significant concerns for businesses when utilizing digital finance providers, however, they highlight challenges in operating devices, a lack of understanding of fintech products, and insufficient transparency in borrowing costs.

“By understanding the unique needs and challenges of these enterprises, stakeholders can work together to create a more inclusive and dynamic financial ecosystem”, said Peter  Morgan, Senior Consulting Economist and Advisor to the Dean, ADBI.

“The data collected contributes to our understanding of the benefits, challenges and future potential of fintech adoption among MSMEs in the region.”

Download your free copy of the report