Following the Asia-Pacific Financial Forum Roundtable, the APEC Business Advisory Council (ABAC) released a report that gathers recommendations to APEC Leaders and Finance Ministers on how regional cooperation can help create the digital infrastructure and ecosystem for financial services to accelerate MSMEs’ digital transformation. It examined critical success factors for the provision of digital financial services to MSMEs, the development of digital identity as a critical underlying building block of digital finance and the digital economy, the legal and regulatory frameworks and measures to strengthen MSMEs’ trust in the digital economy. It also identified initiatives that APEC can undertake to achieve concrete results in key areas.
For many MSMEs, efficient access to financial services and supply chains are the most important factors for survival and growth. Innovative financial service providers are stepping in with digital solutions to enable MSMEs to meet these needs, and thus to take the first step in digital transformation. The case study illustrated how one innovative company was able to provide an entry point to the digital world for many MSMEs in a developing economy by bringing various participants in the supply chain together to create a digital B2B ecosystem that is facilitating access to credit and markets. As the company evolved from a peer-to-peer lending marketplace to a high-impact platform that offers digital business solutions to MSMEs, its clients have started to digitally transform their operations, starting with the core areas of invoicing, bookkeeping and procurement.
In the context of the post-COVID world, in addition to the above-mentioned steps, APEC also needs to support the reconstruction of supply chains that have been disrupted by the pandemic, since these supply chains provide the platform for MSMEs to gain entry to the digital world through financial services. While there will be analog elements that will remain relevant in the provision of financial services, it is important for the region’s financial institutions to accelerate their own digital transformation and harness digital technology to obtain the data and the tools to expand services to MSMEs and develop the capability to serve their needs even in difficult times. Finally, regulators will need to pay close attention to new sources of financial instability that could arise in a digitalized environment, where systemic crises may look very different from those the world has faced in the past.
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Download the full report here>