Supporting MSMEs' Digitalization Amid COVID-19

Key messages from this policy brief are:

• MSMEs are particularly vulnerable to the economic impacts of the COVID-19 pandemic. Targeting economic relief for small businesses has been a critical component of policy interventions in APEC economies. These interventions have included a range of fiscal and monetary policies, as well as initiatives promoting digital adoption.
• The COVID-19 crisis is pushing more consumers online and accelerating the adoption of e-commerce – this will require further digital adaptation by MSMEs.
• While the immediate benefits of digital interventions may vary between sectors and firms, adoption of digital solutions can help MSMEs in areas such as: 1) managing transactions at a distance; 2) delivering goods efficiently; 3) facilitating access to financial services; and 4) engaging with new and existing customers.
• Promoting the digitalization of MSMEs can help address a number of the economic challenges posed by the COVID-19 crisis; however, the process of adopting new digital approaches to selling does not come without risks.
• Despite the clear benefits, it is crucial to recognize the complex challenges that digitalization presents, including: 1) cybersecurity and data privacy concerns; 2) exposure to digital fraud; 3) online misinformation; 4) asymmetric market power and platform dominance; and 5) persistent digital divide and infrastructure-related issues.
• Supporting MSMEs’ digitalization efforts amid COVID-19, therefore, requires policymakers to adopt a two-pronged set of interventions that allows MSMEs to reap the benefits of the digital world while overcoming the challenges of digitalization.