Small and medium-sized enterprises (SMEs) make up an astounding 97% of all enterprises, contributing between 40% to 60% to regional GDP and employing over half of APAC's workforce. In Asean specifically, micro, small and medium enterprises (MSMEs) represent 96% of all businesses, providing between 50-85% of non-agricultural employment. These enterprises often serve as crucial entry points for women and young entrepreneurs into the formal economy.
Despite their economic significance, these businesses face a staggering financing gap. The global financing gap for small and medium-sized enterprises (SMEs) is estimated at nearly US$5.7 trillion ($7.65 trillion). When we factor in informal enterprises, this figure rises to an alarming US$8 trillion. In Asia, the credit gap for small and medium-sized enterprises (SMEs) is approximately US$2.7 trillion. Restrictions in access to finance, equity, and payment services primarily drive this significant shortfall.
According to the Asian Development Bank, financing for small and medium-sized enterprises (SMEs) constitutes 22% of total bank loans in developing economies across the Asia Pacific region. Despite significant strides in financial inclusion in India, for example, less than 11% of SMEs have access to formal credit. In Singapore, the percentage of business loans to SMEs sat at just 10% as of 2022. This highlights a critical gap that, if addressed, could unlock substantial economic potential and empower a vast segment of the entrepreneurial landscape.
When you consider that globally, over 60% of sales in Amazon’s store come from independent sellers (most of which are SMEs), it sets the stage for our focus at this year’s Singapore FinTech Festival (SFF). Building on our successful partnership with the Monetary Authority of Singapore (MAS), which last year brought to life a common customer use case for programmable money, participation in SFF this year provided a strategic opportunity to test and validate our ideas within a sandbox -- fostering innovation and initiating important conversations about the industry's future direction.
SMEs are critical to our offering, providing customers with an incredible range of products at competitive prices. While we are proud to provide the infrastructure that helps these businesses reach more customers, we are also acutely aware of the challenges they face, especially those new to digital commerce or underserved by traditional financial systems.
These very challenges have shaped our approach to innovation. Insights from our SME partners have helped us to understand the critical importance of flexible cash flow management and accessible funding options. This drives our collaboration with regulators, policymakers, and industry stakeholders to develop targeted solutions that address country-specific needs.
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Our work with leading institutions like the Bank for International Settlements, MAS, and the Bank of England focuses on practical applications of frontier technologies: blockchain payments, smart contracts, and central bank digital currencies. Building on last year's successful demonstration of programmable payments with MAS, Grab, and StraitsX, we took another significant step forward at this year's SFF.
In partnership with StraitsX and NTT Digital, we were proud to showcase an experimental project that tackles the fundamental challenges SMEs face in securing financing. SFF attendees who visited the Amazon booth participated in the experiment and experienced how MSMEs could obtain tokenised payables on the blockchain, leveraging regulated digital currencies, smart contracts and programmable payments. In the test case, MSMEs who receive these tokens could place them on a blockchain-based exchange for lenders to purchase the token (at a small discount) and provide cash flow to the MSMEs.
The demonstration revealed how blockchain-based programmable contracts can transform traditional payables into tradeable tokens, similar to promissory notes. This innovation could allow SMEs to access immediate funding by trading these tokens at competitive rates, potentially evolving how small businesses manage their working capital.
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At Amazon, we see ourselves as a catalyst, offering technical expertise but primarily focusing on how bringing together a diverse group of voices and knowledge that can propel forward technical advances to help reshape supply chain finance and digital assets. Ultimately, the hope is that this will create more opportunities for efficiency, trust and scalability that benefits SMEs, potential investors, and of course, customers.
The Singapore FinTech Festival provides a unique forum for public and private sector stakeholders to collaborate. This is significant as the event encourages partners to help advance these initiatives, by offering the opportunity to garner insights, assess business models, and consider stakeholder feedback to develop practical, impactful solutions.
The relationship between economic growth, financial stability, and innovation is clear, but addressing SME financing gaps requires sustained, coordinated effort from policymakers, financial institutions, and technology firms. By developing commercially viable, technology-driven models for small businesses, we can help to drive financial inclusion at this critical juncture.
Sujit Misra is the director of Apac Payments at Amazon
