Rethinking MSME Finance in Asia and the Pacific - A Policy Agenda: Post COVID-19 Crisis

Masato Abe, Nick Freeman and Mike Troilo
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Masato Abe: Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific
Nick Freeman: Consultant, Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific
Mike Troilo: Consultant, Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific

No PB118, MPDD Policy Briefs from United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)

Abstract: The COVID-19 pandemic is a global catastrophe, with no region spared including Asia and the Pacific. The cost has been considerable, whether measured in terms of public health or economic fallout. In a bid to constrain the spread of the coronavirus, national and local governments were obliged to lock down public spaces, forbade business transactions in person, restricted travel, and otherwise interdicted the flow of people, goods, and services globally. The consequences for business have been acute (ESCAP, 2021). Micro, small, and medium-sized enterprises (MSMEs) naturally suffered more than large firms, given their limited human and financial resources, and heavier reliance on cash flows. The exogenous shock of the sudden, dramatic curtailment of business was a blow that ended an unknown number of MSMEs across the region. Access to finance, already a major constraint to MSME development prior to the pandemic, has worsened considerably, even in cases where governments have had sufficient resources to enact emergency policies aimed at keeping their MSME sectors afloat (ESCAP, 2021). The environment remains difficult. Despite these challenges, the pandemic represents an opportunity for MSME finance in the region. Policymakers can build back better to enable MSME finance to be more sustainable, efficient, and resilient. This will require dramatic changes in how policymakers and all stakeholders, including members of the international development community such as ESCAP, view MSME finance: its provision and related services. In this policy brief, we propose a holistic framework to capture this new thinking.

Date: 2021-09
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