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Mastercard's Support for MSMEs: A Game Changer for Financial Inclusion

Writer's picture: Emil GasparyanEmil Gasparyan

In a significant move to bolster financial inclusion for micro, small, and medium-sized enterprises (MSMEs) in the Asia-Pacific region, the Asian Development Bank (ADB) has partnered with the Mastercard Impact Fund. This collaboration aims to address the substantial financing gap faced by MSMEs, particularly those led by women and those focused on climate finance.

Key Takeaways

  • ADB and Mastercard Impact Fund have launched a partnership to support MSMEs.

  • A USD 5 million grant will facilitate up to USD 1 billion in financing for financial institutions.

  • The initiative targets women-led businesses and climate finance.

  • 70% of women-owned MSMEs face financial challenges in the region.

The Importance of MSMEs in the Economy

MSMEs play a crucial role in the economic landscape of the Asia-Pacific region, contributing significantly to employment and GDP. However, many of these enterprises struggle to access the necessary financing to grow and thrive. The partnership between ADB and Mastercard aims to unlock the potential of these businesses by providing them with the financial resources they need.

Addressing the Financing Gap

The Asia-Pacific region accounts for 52% of the total financing gap for emerging market MSMEs, estimated at nearly USD 2.5 trillion. Within this context:

  • 43% of formal SMEs remain unserved or underserved by financial institutions.

  • 70% of women-owned MSMEs encounter significant hurdles in obtaining financial assistance.

This partnership seeks to address these challenges by leveraging the resources and expertise of both organizations to provide targeted support to MSMEs.

Focus on Women and Climate Finance

A notable aspect of this initiative is its commitment to supporting women-led businesses and those focused on climate finance. ADB has pledged that at least 50% of its total financing will be allocated to these sectors over the next four years. This focus is particularly important given the historical underfunding of women-owned businesses, which received only 4% of total investment funds in 2018, dropping to 2% by 2021.

Target Markets

The initial target markets for this initiative include:

  1. India

  2. Indonesia

  3. Malaysia

  4. Philippines

  5. Thailand

  6. Vietnam

  7. Georgia

By concentrating efforts in these regions, the partnership aims to create a more inclusive financial ecosystem that empowers MSMEs and promotes sustainable economic growth.

Conclusion

The collaboration between the ADB and the Mastercard Impact Fund marks a significant step towards addressing the financing challenges faced by MSMEs in the Asia-Pacific region. By combining their strengths, both organizations are committed to fostering an environment where businesses can thrive, ultimately contributing to inclusive and sustainable economic development.

Sources

  • ADB collaborates with the Mastercard Impact Fund to assist MSMEs - ThePaypers, The Paypers.

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