Asia–Pacific contributed around 70% of global economic growth in 2023, with Micro, Small and Medium Enterprises (MSMEs) forming a core pillar of the region’s growth agenda. As economies across Asia prioritise innovation, localisation, and regional integration, MSMEs have assumed a central role in long-term development strategies. Consequently, investment from both public and private sectors in MSMEs is expanding, reflecting their essential contribution to sustainable economic growth.
Investing in MSMEs could add significantly to the continent’s overall economy
MSMEs are a significant driver of economic activity across Asia. MSMEs contribute an average of 38% to national economic output, though the figure varies depending on each country’s level of development and business formalisation. In Malaysia, MSMEs employ around 48% of the workforce, compared to 70% in Singapore. Across ASEAN as a whole, they account for 97% of private-sector enterprises, provide jobs for 85% of the labour force, generate around 45% of regional GDP and contribute between 15 and 20% of total exports. Despite their scale and impact, access to finance remains one of the sector’s biggest constraints. A study by the McKinsey Global Institute, covering 16 advanced and emerging economies, estimates that improving MSME productivity and closing financing gaps could add the equivalent of 5% to GDP in advanced economies and 10% in emerging Markets.
Investing in MSMEs to unlock employment and inclusion
The World Bank estimates that around 600 million new jobs will be needed by 2030 to absorb the expanding global workforce, with small and medium-sized enterprises expected to create seven in every ten of these roles. Across Asia, this places MSME development at the centre of economic and employment planning. Beyond macroeconomic growth, the growth of MSMEs supports poverty reduction, improves access to livelihoods and drives economic empowerment at the local level. Their role is also integral to advancing the UN Sustainable Development Goals, particularly in areas of equality, inclusion, and sustainability. As key employers of women and marginalised communities, MSMEs help build resilience and drive more inclusive social progress.
MSMEs as high-growth investments
Many of today’s most valuable corporations began as small enterprises, a reminder of the long-term potential that early-stage businesses can hold. Across Asia, MSMEs are attracting increasing attention from both local and international investors because of their scalability, adaptability and capacity for innovation. Based on reports for 2024, the Asia-Pacific private equity market experienced a cautious recovery. The Bain & Company Asia-Pacific Private Equity Report 2025 noted that deal value in the region rose by 11%, while EY’s India-focused reports noted that investments of around $56 billion were recorded in India alone, with analysts highlighting growing interest in tech-enabled and sustainability-focused MSMEs across the region.
Structural barriers to MSME growth
The International Finance Corporation (IFC) estimates the global finance gap for formal small and medium-sized enterprises at around $5.7 trillion, rising above $8 trillion when informal businesses are included. According to ADB, MSMEs received only 17.7% of total bank lending across Asia in 2023, equivalent to an average of 10% of regional GDP. Lending frameworks also tend to favour larger firms, leaving smaller enterprises underserved. Several structural issues contribute to this shortfall. These include:
- Limited collateral,
- Restrictive lending conditions, and
- Low financial literacy among smaller business owners
In addition to financing challenges, MSMEs face a pronounced productivity gap: in emerging Asian economies, productivity typically stands at about 25–30% of that of large firms, constraining competitiveness and growth potential.
Key strategies to strengthen MSMEs
Access to finance
Access to funding remains the biggest challenge for small businesses in Asia. ADB and Mastercard (2024) estimate that the Asia-Pacific region accounts for nearly $2.5 trillion of the global MSME financing gap, with 43% of formal SMEs still unserved or underserved. Expanding credit availability through government-backed lending, digital credit channels, and tailored financial instruments remains essential to bridge this gap.
Private financing
Private capital continues to play a crucial role in scaling MSMEs, particularly in Asia’s emerging markets where access to traditional bank lending remains limited. IFC (2025) highlights the importance of greater participation from private investors and impact funds to help close the global SME finance gap. In Asia, blended-finance models are gaining traction, combining concessional funding with private equity to expand credit for women-led and green enterprises. Regional investment platforms such as ADB Ventures and the Mastercard–ADB partnership are mobilising capital for early-stage and growth-stage businesses in sectors including clean energy, agritech and digital services.
Formalisation
Bringing informal enterprises into the formal economy remains a key development priority. The International Labour Organization’s Asia-Pacific Labour Market Report 2025 shows that the informal sector still represents around 68% of total employment in South and Southeast Asia. Greater formalisation would enhance access to finance, improve regulatory visibility, and strengthen protections for workers and entrepreneurs alike.
Digitisation
Digital adoption is increasingly linked to MSME growth across Asia. A 2024 survey in India found that 73% of small businesses in semi-urban and rural areas reported higher revenues after adopting tools such as mobile payments and online marketplaces. In Southeast Asia, nearly 90% of digital SMEs said they had expanded their sales and market reach through digitisation, reflecting the strong link between technology use and business performance.
Sector-focused strategy
The ADB and OECD highlight high-potential sectors for MSME-led growth including agritech, green manufacturing, logistics, and digital services. Targeting these areas through supportive policy, innovation hubs and blended finance could generate significant employment while advancing regional sustainability goals.
Current MSME investment trends
Investment in Asia’s MSME ecosystem continues to expand, supported by the region’s growing role in global supply chains and rapid digital transformation. Private equity buyout investments across Asia reached around $138 billion in 2024, rising by just over 8% from the previous year. Venture capital activity also remained strong driven by investor interest in technology, agritech and clean-energy enterprises.
Cross-border partnerships are also playing a larger role in MSME financing, as investors increasingly collaborate to facilitate technology transfer, innovation, and business expansion. Meanwhile, multinational corporations are increasing investment in local MSME supply chains to strengthen regional resilience and sustainability performance.
Asian MSME progress
Across Asia, MSMEs have continued to expand and formalise, supported by targeted policy measures and regional partnerships. In Indonesia, the sector now contributes around 61% of GDP and employs 97% of the workforce. In Vietnam, SMEs make up over 95% of all registered enterprises, contributing more than 40% of GDP and employing around half of the national workforce. India’s MSME ecosystem has also advanced through large-scale digitisation, with over 60 million businesses now registered on the Udyam portal and the Udyam Assist Platform. Together, these enterprises contribute around 30% of India’s GDP and play a vital role in employment generation and exports.
In 2024, ADB and the Mastercard Impact Fund signed an MoU to support MSMEs across APAC, initially targeting Malaysia, Indonesia, Thailand, India, the Philippines, Vietnam, and Georgia. The initiative includes a $5 million grant to catalyse lending, particularly for women-led enterprises and climate-focused businesses, and will support up to $1 billion in ADB financing over four years through risk-reduction capital, incentives, and capacity building.
Across Asia, governments and development institutions are rolling out targeted initiatives to strengthen MSME growth and resilience. Some of the key national and regional programmes supporting MSMEs through credit, incubation, and digital transformation are listed below:
Singapore – SMEs Go Digital
The national initiative in Singapore led by the Infocomm Media Development Authority (IMDA) to help SMEs adopt digital tools and build their capabilities. The program has assisted over 95,000 SMEs by providing grants, advisory services and access to pre-approved digital solutions to boost efficiency and market reach.
Thailand – SME Soft Loan Schemes
The Thai government continues to expand financial support for small businesses, including a THB 50 billion national SME loan initiative and a dedicated THB 15 billion scheme for southern-border provinces to help sustain operations and employment.
Philippines – Kapatid Mentor ME (KMME) Programme
This long-running initiative in the Philippines provides business coaching, mentorship and learning modules for MSMEs. It is a public-private partnership between the Department of Trade and Industry (DTI) and the Philippine Center for Entrepreneurship (PCE) or Go Negosyo. Since its launch in 2016, the program has mentored thousands of entrepreneurs nationwide.
Indonesia – PROMISE II Impact Programme
Focused on circular economy, climate innovation, and inclusive growth, this programme supports impact-driven MSMEs and encourages private-sector collaboration for sustainable scaling.
Sri Lanka – Small and Medium-sized Enterprises Line of Credit (SMELoC) Project
ADB continues to support Sri Lanka’s SME sector through the Small and Medium-sized Enterprises Line of Credit (SMELoC) programme. The programme aims to enhance access to affordable finance for small businesses via local partner banks. The initiative prioritises underserved segments such as women-led and climate-focused enterprises. Backed by the Women Entrepreneurs Finance Initiative (We-Fi), the programme has expanded over multiple phases, including additional funding during the COVID-19 period to provide working capital support and stabilise affected MSMEs.
AIM ASEAN Initiative
The AIM ASEAN programme is a two-year initiative led by the ASEAN Foundation in partnership with AVPN through the AI Opportunity Fund: Asia-Pacific (Phase 2), supported by ADB and Google.org. The programme aims to train 100,000 MSMEs across all ten ASEAN Member States by providing hands-on, practical guidance on how to use AI tools to improve business operations, increase online sales, and manage finances more effectively. Training materials are being developed and adapted with local partners to reflect the real-world challenges and goals of business owners, helping MSMEs harness AI for tangible day-to-day benefits.
