Kemal Brown | Digital technologies – catalyst for MSME growth

Digitisation has altered the landscape of global commerce, creating new opportunities for businesses. For the micro, small, and medium enterprises (MSMEs), the impact of these innovations is particularly profound, offering a pathway to growth. In Jamaica, MSMEs account for over 90 per cent of registered businesses and contribute approximately 40 per cent of gross domestic product (GDP), according to the Jamaica Business Development Corporation (JBDC). As we navigate the complexities of a post-pandemic economy, the role of digital technologies in catalysing MSME growth cannot be overstated.

Globally, MSMEs represent the backbone of most economies, contributing to over 90 per cent of businesses and accounting for 50 per cent to 60 per cent of total employment. According to the World Bank, MSMEs play a critical role in developing economies, contributing up to 40 per cent of national income (GDP). Locally, in Jamaica, MSMEs employ about 82 per cent of the labour force, highlighting their critical role in job creation and economic stability. They are the bedrock of innovation and entrepreneurship. However, the challenges they face are numerous - limited access to capital, narrow market reach, inefficiencies in operations, and a persistent digital divide that widens the gap between those who can and cannot adopt new technologies.

The answer to many of these challenges lies in the strategic adoption of digital tools. A recent McKinsey report highlights that companies embracing digital transformation can see productivity improvements of up to 40 per cent. A 2020 report from the Development Bank of Jamaica (DBJ) identified e-commerce, digital marketing, and cloud computing as key drivers of MSME growth in Jamaica, with businesses using e-commerce platforms experiencing a 25 per cent increase in sales. Digital tools like these provide MSMEs with the ability to transcend traditional barriers, improving efficiency and expanding market reach. For instance, businesses using e-commerce grow up to four times faster than those that don’t, according to the International Trade Centre. Take, for example, a small retail business leveraging platforms like Shopify or Amazon. With these tools, a local business can become a global player, expanding its customer base far beyond its immediate geography.

FLEXIBILITY TO INNOVATE

Moreover, digital technologies offer MSMEs the flexibility to innovate continuously. Cloud-based tools like customer relationship management software enable businesses to streamline operations, while fintech solutions simplify financial management and enhance access to credit. The International Finance Corporation estimates that MSMEs in developing countries face a $5.2 trillion finance gap annually. Local MSMEs face an annual financing gap of US$500 million. Digital solutions such as mobile money and digital lending platforms help close this gap, offering MSMEs a much-needed lifeline in an increasingly competitive market.

However, the path to digital transformation has its challenges. For many MSMEs, especially those in developing economies, the cost of technology, a lack of digital literacy, and inadequate infrastructure are significant obstacles. According to the United Nations Conference on Trade and Development, nearly half of the world’s population is still offline, with a pronounced digital divide between urban and rural areas. In Jamaica, the rural-urban digital divide remains a challenge, with broadband penetration in rural areas lagging behind that of urban centres. This is where the ecosystem – government policies, public-private partnerships, and capacity-building initiatives – play a crucial role. Governments must create favourable policies that incentivise digital adoption and invest in critical infrastructure like broadband access in rural areas. In Jamaica, the government’s National MSME Policy Framework and initiatives tied to digital readiness aim to equip MSMEs with the skills and tools necessary for success in a digital economy.

POTENTIAL

The success stories of MSMEs who embraced digital transformation are a testament to the potential that lies ahead. For example, a study by the World Economic Forum found that digitalised MSMEs were 50 per cent more likely to innovate their business models and operational processes, leading to higher resilience and faster recovery from crises. In Jamaica, several MSMEs have harnessed the power of mobile payment solutions and cloud-based services, revolutionising their operations and reaching new customers both locally and internationally. These case studies illustrate that digital tools are not just a luxury but a necessity for modern business.

As we look to the future, the adoption of digital technologies by MSMEs will determine the trajectory of economic development. The World Bank estimates that widespread digital adoption could add $1.5 trillion to the global economy by 2025. In Jamaica, according to the DBJ, increased digital adoption by MSMEs could boost the country’s GDP by 3 per cent over the next decade.

In this new digital economy, MSMEs are no longer confined by geography or limited by resources. The opportunities are vast, and the potential for growth is immense. What is needed now is a collective push – by businesses, policymakers, and institutions alike – to ensure that MSMEs are equipped with the tools and knowledge to navigate this new terrain. Only then can we unlock the full potential of digital technologies as a catalyst for MSME growth and, by extension, national economic development.

The future belongs to those who are prepared to innovate, adapt, and embrace the digital revolution. MSMEs, with the right support and strategies, are poised to lead this charge.

Kemal Brown is the founder and CEO of Digital Global Marketing Lt. This article derives inspiration from his presentation at a recent Digital Jamaica Summit. Send feedback to columns@gleanerjm.com