A Digital Dialogue on ‘Digitizing MSMEs for a Digital Pakistan’ was held in honour of the International Day of Micro, Small and Medium Enterprises (MSMEs), which is observed every year on June 27th around the world. The discussion focused on how digitization might help to improve Pakistan’s current financial ecosystem for micro and small businesses.
The session was hosted by Saad Hameed Khan, Head of Lending Transformation & Digitization – Easypaisa / Telenor Microfinance Bank, and the panel comprised renowned industry leaders, including Syed Mohsin Ahmed, Chief Executive Officer – Pakistan Microfinance Network, Navid Goraya, Chief Investment Officer – Karandaaz Pakistan and Kamran A. Zuberi, Chief Executive Officer – Finja Lending Services Ltd.
MSMEs are the backbone of Pakistan’s economic infrastructure, accounting for 40% of the country’s exports and a similar percentage of GDP. However, the industry is currently confronted with a number of obstacles, the most significant of which is a lack of access to financial services, which has resulted in limited access to formal credit. This problem can be solved by digitising small businesses and bringing them into the financial system through digital payments and financing.
During the discussion, panellists examined how SMEs have access to only 7% of total private lending, whereas in other regional markets, it might be as high as 30% or more. Similarly, SMEs are offered credit worth only 1% of the country’s GDP. This number varies widely in various South Asian countries, ranging from roughly 9% to 10%. Given the limits imposed on the SME sector by the supply side, there is naturally less motivation for them to organise themselves, borrow, or digitise.
Participants also stressed that MSMEs will only be able to modify their behaviour if there is no friction, which comes in the form of pricing. Because it is particularly sensitive to customers across the board, the costs associated with digital payments must be incentivized in order to go cashless.
It was also mentioned that one method to address the MSME sector’s issues is to view digitization as more than just a tool for documenting the economy. That may be a side effect of a financially inclusive society, but it is not its overall goal. This strategy will change the way policies and frameworks are created, allowing for more inclusive financing to be achieved through digitization.
Over the years, Pakistan’s microfinance institutions have made significant progress in creating suitable digital infrastructures for both individual consumers and MSMEs. The country’s most prudent business sector can accomplish wonders for itself and the wider economy by reducing the need for complicated documentation and digitising transactions.