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DUSHANBE — The impact of Russia’s invasion of Ukraine on small businesses in Central and West Asia underscores the need for improved strategies to strengthen the region’s entrepreneurial base, according to a report by the Asian Development Bank (ADB).
The effects on micro, small and medium-sized enterprises (MSMEs) in the region are multiple and vary from country to country, according to the first and second volumes of the Asia Small and Medium-Sized Enterprise Monitor 2022, released today.
MSMEs play a prominent role in the private sector in Central and West Asia. They accounted for 98.9% of all enterprises, 46.1% of the workforce, 40.7% of economic output and almost one-third (32.4%) of total exports on average, based on available data up to 2021. recovery from the COVID-19 pandemic, Russia’s invasion of Ukraine, and related sanctions have since disrupted MSME operations. Exports are particularly affected, due to the heavy reliance on the Russian Federation as a trading partner.
“Governments in Central and West Asia need to refine their strategies to support MSMEs’ foreign trade as well as develop domestic commodity markets,” said ADB Chief Economist Albert Park. “Support for growth-oriented entrepreneurs will help unlock new productivity, and this support should continue to target youth, women, agribusiness and technology startups.”
Internationalizing MSMEs and fostering innovation can help accelerate economic recovery and inclusive, resilient growth, the report said. Given that this sector represents a smaller workforce than other Asian regions—67.3% in Southeast Asia and 76.6% in South Asia—job creation remains a critical issue for MSME development in Central and West Asia. Young and female entrepreneurs have the potential to improve the labor market in the region and accelerate inclusive growth.
Improving digital skills and infrastructure is key, along with diversifying funding sources for small businesses. The market of loans for MSMEs is still small in the region. Bank loans to MSMEs averaged 9.0% of GDP and 31.4% of total bank loans during 2015–2021. Small loan markets have led governments to offer financial assistance to MSMEs. Shifting from a heavy reliance on subsidy-backed finance to more market-based finance – capital markets and digital finance platforms – should be the focus of policy discussions.
ADB is committed to achieving a prosperous, inclusive, resilient and sustainable Asia and the Pacific, while maintaining its efforts to eradicate extreme poverty. Founded in 1966, it is owned by 68 members—49 from the region.
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