2025 Broadband Advocacy Target 6
GET MSMEs ONLINE
By 2025, improve connectivity of micro-, small- and medium sized enterprises (MSMEs) by 50%, by sector
The connection of Micro-, Small- and Medium-sized Enterprises (MSMEs) with broadband will increase their competitiveness and allow them to participate in the global marketplace where online business transactions are increasingly the norm.
In 2018, when this target was established, these goals were considered particularly ambitious, calling for a 50 per cent increase in broadband connectivity in MSMEs by sector. For example, a sector in which MSMEs are 80 per cent unconnected in 2018, will have only 40 per cent unconnected by 2025. MSMEs also face several challenges in broadband adoption, including the:
- availability of necessary technologies to digitalize (high-speed connectivity in urban and rural areas) and suitable digital tools and services;
- capacity of SMEs to digitally transform, when it comes to financial resources and time (and the pandemic has deepened these constraints); and
- capability of SMEs to gauge, plan, finance, implement and optimize their transformation through digital skills.
However, since the onset of the COVID-19 pandemic, MSMEs in particular have experienced extreme consequences, with 8% more likely to have (temporarily) shut down due to the pandemic than larger firms. Many MSMEs, particularly in low- and middle-income countries, were caught off-guard following the introduction of quarantines. With no broadband Internet access, they were unable to pivot swiftly to online operations to sell products and services. Digitalization can give MSMEs a competitive edge during normal times and enable them to better cope with the increasing challenges brought by the pandemic and strengthen their future resilience.
Connectivity data disaggregated by enterprise size is widely available for high-income nations, although not always for micro-enterprises. For most low- and middle-income countries, even aggregated data on total enterprises with Internet access is not available, let alone by sector. Hence it is difficult to gauge the severity of the problem. The nature of the connectivity is also important. A one-person micro enterprise might find having a smartphone with wireless access sufficient to carry out operations, particularly for social media based online selling.
A survey of informal enterprises in nine African countries found low levels of ICT use. Use of the Internet for business purposes was 7 per cent on average ranging from 24 per cent in South Africa to 1 per cent in Rwanda. Computer ownership is also low with over 90 per cent of businesses surveyed in Ghana, Kenya,
Mozambique, Nigeria, Rwanda, Tanzania and Uganda reporting not having one. Most cited not having a need for Internet access or computers in their business. A UNDP survey focusing on MSMEs in Kenya revealed that they were adversely affected by the pandemic, with one out of every 10 enterprises surveyed indicating a shutdown of their businesses due to the pandemic. However, MSMEs that have higher digital maturity reflected lower levels of negative impact on incom.
Transformative risks and opportunities
Tracking, and target definitions may require refining, to achieve inclusive entrepreneurship and trade
One of the biggest challenges for improving MSME policy is the lack of standardized definitions for MSMEs, as well as difficulties in tracking the impact that policy has on MSMEs. As highlighted, connectivity data is not always available, and in many instances, aggregated data is not available for all enterprises, but not by sector and not by enterprise size.
Unless such data is collected, it will be difficult to formulate and monitor policies that promote inclusive entrepreneurship and trade.
Broadband Commission Working Group on Connectivity for MSMEs 2023 – Co-Chaired by ITC and GSMA
The Working Group on Connectivity for MSMEs has sought to define the key challenges and opportunities associated with MSME connectivity and its enablement in low- and middle-income countries (LMICs). The working group relied on input from its members, interviews, desk research, and studies provided by its co-chairs: the ITC study on MSME connectivity in Francophone Africa, and the GSMA study on the use of mobile connectivity by women micro-entrepreneurs in LMICs.
MSME connectivity is a journey through several stages of connectivity. While micro-enterprises rely on individual connectivity to conduct business and engage in online trade, larger enterprises require more advanced connectivity and ‘digital enablers’ such as webhosting, platforms and digital financial services. MSMEs face several barriers to leveraging digital connectivity, related to access, affordability, relevance, knowledge and digital skills, as well as safety and security. Women micro-entrepreneurs are heavily impacted by the social norms and structural inequalities of their respective regions and stand to benefit from approaches to advance digital connectivity that are gender inclusive.
Overall, increasing MSME participation in the digital economy will require stakeholders such as governments, international organizations, companies, and NGOs, to fully participate in facilitating this trajectory: closing connectivity gaps; creating digital enablement to drive awareness and usage, and programmatically supporting underserved and marginalized communities.