Empowering growth: Policy best practices for micro enterprise inclusion in Asia Pacific

Digital payments are more than a financial tool. They offer a pathway to integrate the scattered yet sizeable micro and small enterprises (MSEs) sector into the formal economy. 

A recent research paper by Visa, in collaboration with ODI Global Advisory, outlines how targeted policy interventions can promote inclusions while addressing risks associated with digital transformation. 

Micro, small and medium enterprises (MSMEs), with MSEs as a vital subset, are estimated to account for between 97.2 to 99.9 per cent of total business establishments in ASEAN member states. 

To ensure inclusion efforts are effective, the research highlights the importance of addressing economic constraints, geographic disparities, and the need for meaningful engagement with MSEs communities. 

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Key enablers of inclusion 

Drawing from case studies in Colombia and South Africa, the research identifies three foundational pillars for successful inclusion of MSEs.  

Addressing economic constraints: Adoption of digital payments hinges on affordable, reliable and secure access to infrastructure such as electricity, internet connectivity and digital devices. Policies must also tackle demand side barriers including limited financial literacy and low trust in formal institutions. 

Recognising diversity of MSEs: MSEs are not a uniform group and vary widely in their use of digital payments. The paper categorises them into three segments: 

• Formal urban enterprises that frequently use digital payments 

• Hybrid enterprises operating in both formal and informal economies, leveraging a mix of cash and digital payments 

• Informal rural enterprises that rely almost entirely on cash 

Recognising these differences is vital for designing contextually relevant policies and ensuring that a range of digital financial services is available to meet varied needs. 

Embedding MSEs’ voices in policy design: Despite their economic importance, the voices of MSEs have historically been underrepresented in policy making with larger enterprises dominating the conversation. Interviews with MSE associations and civil society emphasise the need for both government and private sectors to cooperate in more meaningful consultation processes with MSEs, embedding their needs into policy and strategy design, rollout and evaluation. 

Policy recommendations 

To accelerate inclusions through digital payments, research insights outline five actionable steps for governments and stakeholders: 

1. Expand access: Identify where and how to broaden digital payments access for MSEs ready for transformation and prioritise interventions for maximum impact 

2. Strengthen ecosystem: Build robust digital payment ecosystem in partnership with the private sector and civil society to maximise benefits and minimise risks 

3. Engage MSEs: Foster trust and improve policy design through ongoing meaningful engagement with MSEs 

4. Invest in coordination: Support institutions and capabilities that coordinate digital payment initiatives 

5. Communicate clearly: Develop and communicate policies on digital payments, formalisation and taxation to ensure transparency and understanding 

As governments across Asia Pacific recognise the untapped potential of the MSEs sector, digital payments can be a catalyst for economic inclusion and empowerment.

Success depends on trust, transparency, and policies that are co-created to address the needs of these communities. 

This is the second of two articles on Visa Government Solutions’ micro and small enterprises research insights. You can read the full research paper here and part one here.