Digital Public Infra Can Bridge 50% MSMEs Credit Gap In Low, Middle-income Nations: Report

New Delhi, Dec 28 (KNN) Half of the credit gap faced by MSMEs in low and middle-income nations can be closed with the help of digital public infrastructure (DPI) which will develop digital products and services, said Global wealth and asset management company Lighthouse Canton in its report on Wednesday.

The report, showcasing the outcomes and prospects following the 2023 G20 summit under India's presidency, noted that the use of DPI can also ease credit access for an additional 16-19 million MSMEs in such countries. 

"Effective deployment of DPI can address existing digital divides and enable inclusive and sustainable development. As a continually evolving concept and a suite of shared digital systems, DPI can be nurtured and utilized by both the public and private sectors," said Sumegh Bhatia, Managing Director and CEO, Lighthouse Canton India.

The report's observations on MSMEs echoed recommendations by the World Bank focusing on MSMEs. A G20 Policy Recommendation paper by the World Bank on advancing financial inclusion and productivity gains through digital public infrastructure (DPI) in September explained how DPIs can help address the challenge of access to credit faced by SMEs by providing latter with access to financial services and information through digital channels. 

The paper made recommendations broadly around how digital payment systems, data exchange DPIs, alternative data sources, use of data exchange and digital payments together, etc., can ease credit access for MSMEs, reported FE Aspire. 

DPI refers to interoperable, open, and inclusive systems supported by technology to provide essential public and private services. Some examples of DPIs are digital ID systems such as India's Aadhaar, Singapore's Singpass, and the United Arab Emirates' UAE-Pass; digital payment systems, especially fast payment systems, such as Brazil's Pix, India's UPI, etc.; and (iii) data-exchange platforms such as India's Digilocker and Account Aggregator, Singapore's MyInfo, Australia's Customer Data Right, etc. 

Around 41 per cent of formal MSMEs have unmet financing needs in emerging markets. The finance gap for them is estimated at $5 trillion while women-owned businesses comprise 23 per cent of MSMEs and account for 32 per cent of the MSME finance gap. 

Meanwhile, the report by Lighthouse Canton maintained that investing strategically in sectors like open credit, digital retail payments including UPI, and broadening Government-to-Person (G2P) systems, could enhance the GDPs of low and middle-income countries by 1-2 per cent.

Additionally, it emphasized that digital IDs, such as AADHAR, have the potential to unlock economic value equivalent to 3-13 per cent of the GDP in these countries, averaging a 6 per cent improvement. 

(KNN Bureau)