On 10 May, the CAREC Institute, in partnership with ADBI, hosted a webinar on “Unleashing the Potential of MSMEs in the CAREC Region: Recommendations for Overcoming Barriers to Finance.” The event aimed to discuss the barriers and opportunities faced by micro, small and medium enterprises (MSMEs) in the region and identify innovative solutions needed to support the development and financial inclusion.
MSMEs have a substantial share in the CAREC economies. The share of the registered MSMEs is around 90%. The MSMEs’ share in the GDP of the four CAREC economies, namely Pakistan, Uzbekistan, Kazakhstan and Georgia is 40%, 51%, 31% and 61%, respectively. The low share of the MSMEs in GDP indicates these economies are still dominated by large and state-owned enterprises. Still, MSMEs support a big share of the employment in the CAREC region. MSMEs’ share of the total employment in Pakistan, Uzbekistan, Kazakhstan, and Georgia is 80%, 74%, 39% and 64%, respectively. Unfortunately, CAREC MSMEs are less integrated regionally and globally. The share of MSMEs engaged in export and imports for Pakistan is 14%, Uzbekistan 4%, Kazakhstan 6%, and Georgia 6%.
Dr. Jingjing Huang, Deputy Director One of the CAREC Institute, welcomed the speakers and participants of the workshop, and noted the important role of MSMEs in stimulating economic growth and development in the CAREC region through job creation, production of goods and services, and poverty reduction. Consequently, policymakers in the region have prioritized the development of MSMEs and financial inclusion as key components of their national growth strategies. However, MSMEs face various challenges, including limited access to finance, disruptions in supply chains and changing consumer behavior. These challenges have been further intensified by crises and economic shocks such as the COVID-19 pandemic, global trade tensions, and conflicts.
Dr. Kamalbek Karymshakov, Vice-rector and Associate professor at the Kyrgyz-Turkish Manas University, provided an overview of MSME development in the CAREC region. He highlighted the negative impact of recent crises on MSMEs, including supply chain disruptions, rising labor and production costs, and trade diversion. He stressed that policies focused on regional economic cooperation, financial inclusion and digitalization could benefit MSMEs in the region.
Dr. Ghulam Samad, Senior Research Specialist of the CAREC Institute, talked about the coping strategies of MSMEs during the post-pandemic period. He emphasized that most MSMEs need to increase their own production, but the purchasing power of the population of individual countries and national demand are low due to crises. Thus, the business strategies of enterprises should focus on exploring new markets, potential customers, sales channels, digital transformation and the transition to online trading. More importantly, integrating MSMEs into the regional economy can provide greater economies of scale.
Dr. Shi Li, Associate Professor of Accounting and Vice Dean of the Xiamen National Accounting Institute, presented how digital payment platforms and tools can be used to provide MSMEs in the region with greater access to finance, reduce the cost and complexity of financial transactions, and enhance financial inclusion.
Dr. Dina Azhgaliyeva, the research fellow of the ADBI, presented preliminary results from the ADBI household survey on family business and fintech use during the pandemic. The survey indicated (i) improved conditions for family businesses in 2022 compared to 2021, and (ii) increased use of fintech in the CAREC region, which is related either to the conditions of the family businesses or to the financial conditions.
During a subsequent session, representatives from the CAREC member countries shared their countries’ experiences regarding MSME issues and key government policies to support the development of MSMEs. The event ended with a panel discussion with experts from international organizations, focusing on the role of foreign direct investment in the formation and development of the digital economy, the necessary measures to expand access to finance for MSMEs, as well as innovative financing models and technologies that can overcome financial barriers and support the growth of MSMEs.