50% of MSME credit gap in low, middle-income nations can be closed by digital public infra- Report

50% of MSME credit gap in low, middle-income nations can be closed by digital public infra: Report

Global wealth and asset management company Lighthouse Canton in its report on Wednesday said that digital public infrastructure (DPI) to develop digital products and services in a country has the potential to close nearly half of the credit gap faced by MSMEs in low and middle-income nations. 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 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, FE Aspire reported.

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 unmetfinancingneeds 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 theMSMEfinance 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.

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