Today marks the first annual Micro-, Small- and Medium-Sized Enterprise (MSME) Day.
MSME Day is an especially important recent addition to the calendar of International Days observed by the United Nations, because of the key role MSMEs must play to drive the innovation that will fuel tomorrow’s digital economies.
MSMEs already open up new market opportunities, create jobs and drive productivity. Globally, MSMEs account for more than half of all formal jobs – not only in low-income countries (78%), but also in high-income countries as well, contributing up to 66% of employment.
But as we move forward in a digital age in which jobs are being replaced by automation and traditional labor markets are shrinking, innovation from tech MSMEs, in particular, will become increasingly important. And new digital financial services — including blockchain-based systems — will help provide startups with the capital they need to get their businesses off the ground.
MSMEs and the informal sector is a vital source income and employment for the rapidly growing workforce in emerging markets such as sub-Saharan Africa. According to an IMF report, the number of sub-Saharan Africans reaching working age will exceed that of the rest of the world combined in less than 20 years. There is an urgent need to create employment opportunities to sustain the region’s expanding workforce. Insufficient employment opportunities could stifle growth.
Small-scale enterprises and start-ups are also a main source of entrepreneurship and innovation needed in creating a dynamic economy.
The MSME sector is key to establish a “new middle class” in Africa, which could potentially stimulate the demand of goods and services, and spur the region’s economic growth and alleviate poverty, experts say.
Yet, access to credit and funds is one of the major challenges that hinders MSME growth in many countries.
Enter blockchain: an emerging technology that not only is being utilized to drive innovation in the financial industry, but also to transform the MSME ecosystem.
“Our customers are businesses looking to grow across the continent and beyond. Better access to efficient financing is a tremendous way to boost their growth.” — Elizabeth Rossiello, CEO of BitPesa
Blockchain-based systems allows peer-to-peer (P2P) transactions over the internet, where every transaction or exchange of data is recorded and stored in the network – a fully decentralized ledger that offers greater transparency compared to traditional financial systems. By eliminating third-party intermediaries and expenses incurred for exchanging assets, the technology could significantly lower transaction costs, and increase speed and efficiency for lending.
Financial service providers from across the world have been joining forces to create blockchain infrastructure for different areas of the financial system to serve the underserved MSME sector.
For example, blockchain-based financial services like Africa’s BitPesa and Germany’s Bitbond offer alternative payment services and loans for small-scale businesses. The two fintech startups recently established partnership aiming to utilize the technology to make global cross-border lending possible and more accessible.
“Our customers are businesses looking to grow across the continent and beyond. Better access to efficient financing is a tremendous way to boost their growth,” says BitPesa founder & CEO Elizabeth Rossiello.
On April 6, the United Nations adopted a resolution highlighting the importance of MSMEs in achieving the UN’s Sustainable Development Goals (SDGs), and designating June 27th as the International Day for small-scale enterprises.
The International Council of Small Businesses (ICSB), a non-profit organization committed to advance MSMEs and entrepreneurship, has been instrumental to the formation of the Day. And proponents hope MSME Day will help raise awareness of the critical economic importance of MSMEs.
Recognizing the importance of MSME tech innovation in ‘Industry 4.0‘, ITU and the UN Industrial Development Organization (UNIDO) recently announced partnership to strengthen collaboration particularly in the areas of infrastructure, industry and innovation (SDG9), in which the growth of MSMEs has emerged as a priority in the agenda.
Maximizing the benefits of MSMEs is essential to all the factors relating to overall economic growth. Removing the barriers and creating an enabling environment for small-scale businesses to prosper is essential for achieving the SDGs, especially for inclusive and sustainable economic growth (SDG8).