**Bangladesh and ASEAN:** The digital transformation of CMSMEs across ASEAN, particularly in Bangladesh, is reshaping business practices. Despite challenges like cost and skills gaps, new policies and initiatives, including digital financial services and infrastructure development, aim to enhance MSME growth and global market access.
The Financial Express has provided an in-depth examination of the digital transformation underway across Cottage, Micro, Small and Medium Enterprises (CMSMEs) within the ASEAN region, with particular focus on Bangladesh. This transition refers to replacing manual business processes with digital technologies, an evolution that is reshaping enterprise management globally.
Data from the 2022 ASEAN Investment Report highlights the significance of MSMEs in the regional economy, noting that over 97% of enterprises in the ASEAN region fall within this category. These enterprises are substantial contributors to employment, providing around 67% of jobs, and are responsible for nearly 45% of the region’s GDP. They also contribute approximately 28% of gross value added and 20% of export revenues. Furthermore, the start-up ecosystem within ASEAN is concentrated in three member states: Singapore, Indonesia, and Malaysia, which together account for 83% of start-ups with funding exceeding $1 million.
Increasingly, CMSMEs are leveraging digital solutions such as business management software and digital devices to automate functions like accounting, inventory management, and invoicing. Despite the growing integration of these tools, MSMEs face considerable barriers to full adoption. Common challenges include limited skills and expertise required to use digital software, insufficient human resources, and the various costs associated with acquiring, setting up, and operating digital tools. Often, the financial returns do not immediately justify the costs, discouraging many MSMEs from embracing digital transformation.
In Bangladesh, the central bank, Bangladesh Bank, has responded proactively by reviewing its Master Policy on CMSME financing. The updated policy now includes the trading sector within its medium enterprise category and recognises marginal enterprises that possess Unique Business Identification (UBID) or Digital Business Identification (DBID) in accordance with the Digital Commerce Operation Guidelines 2021. Moreover, Bangladesh Bank has advocated for the utilisation of Digital Financial Services (DFS) and Mobile Financial Services (MFS) to support CMSME financing. They have also facilitated the development of QR code technology and chatbot services tailored to CMSMEs, initiatives aimed at creating a clearer digital footprint for these enterprises. Nonetheless, these efforts have yet to fully meet the comprehensive developmental needs of MSMEs in Bangladesh.
The article outlines a series of strategic recommendations to accelerate digital transformation among MSMEs. Key proposals include:
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Establishment of a Comprehensive Policy on Digital Transformation for MSMEs: Such a policy should detail the processes involved, investment in technology, employment of skilled professionals, and service offerings. The government is also urged to develop a Digital Trade Policy that promotes digital trade in international commerce, streamlining trade processes.
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Development of Digital Infrastructure: Ensuring reliable internet connectivity and accessible software tools for MSMEs is crucial. Encouraging competition among software developers and providing consulting services targeted at MSMEs can reduce costs and improve services. The suggestion includes launching ‘nano loans’ to enable marginal MSMEs to acquire digital devices, repayable in convenient monthly instalments.
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Promotion of Digital Education: Initiatives aimed at building digital financial literacy among MSMEs are vital. Technical training institutes should offer affordable or free training programmes to equip youths and entrepreneurs with the skills needed for digital transformation.
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Enhancement of Digital Marketing Techniques: MSMEs using digital platforms such as Facebook, Instagram, TikTok, and e-commerce sites to enhance their market presence should be incentivised with tax benefits. Support organisations should align training programmes with international standards to ensure competitiveness.
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Incentives for MSMEs and Fintech Developers: A package of incentives from the central bank to finance MSME transformation and to support fintech developers innovating for MSMEs is recommended. Exporting MSMEs that have adopted digital technologies should receive concessional duty benefits to encourage increased foreign exchange earnings.
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Encouragement of Investments and Rewards: Chambers of Commerce, industries, and related organisations are encouraged to invest in the digital transformation of marginal MSMEs. They should also annually recognise and reward the top ten MSMEs demonstrating successful digital transformation, thereby encouraging broader adoption.
Bangladesh’s favourable environment, marked by openness to innovation, robust growth prospects, and expanding employment opportunities, positions it well to benefit from the Fourth Industrial Revolution (Industry 4.0). The integration of emerging technologies such as artificial intelligence and data analytics offers MSMEs opportunities to boost operational efficiency, penetrate global markets, and diversify customer engagement.
The writer, a banker and certified Financial Modelling & Valuation Analyst (FMVA), concludes that digital transformation represents an opportunity rather than a hazard for MSMEs to secure a robust digital future in Bangladesh.
Source: Noah Wire Services
