Developing roadmap for MSMEs' digital transformation

Digital transformation is the transition of process-flow from manual to digital intervention in enterprise management. The world economy is moving towards embracing the digital transformation in every sphere of business practices. The majority of business entities in the global market are Cottage, Micro, Small and Medium Enterprises (CMSMEs) and the ASEAN region accounts for most of them. ASEAN Investment Report in 2022 revealed that, more than 97 per cent of enterprises in the region are MSMEs. They account for 67 per cent of employment in the region, an average of about 28 per cent of gross value added, about 20 per cent of export revenues and about 45 per cent of GDP. It has also been exposed that, three member states (Singapore, Indonesia and Malaysia, in that order) account for 83 per cent of start-ups that have raised more than $1 million in funding in the region.
The pursuit of process reengineering from product innovation to procurement and sales is increasing their arena through utilisation of digital means day by day. As part of process automation for accounting, inventory management, invoicing etc. different technologies such as digital devices, business management software are also being integrated. But, there are some barriers noticed to accept the process automation by MSMEs, where the limited skills and knowledge to use the software, human resource constraints, the cost of procurement of digital tools, cost of software set up, cost of operations of the automation are common. Sometimes, the income they earn from their business does not commensurate the transformation cost incurred. As a result they are getting rid of embracing the digital transformation in easiest way.
Bangladesh Bank, the central bank of Bangladesh, has taken a timely initiative by reviewing the Master Policy on CMSME financing, which includes the trading sector under the medium enterprises category and recognizes marginal enterprises possessing UBID (Unique Business Identification) or DBID (Digital Business Identification) as per the Digital Commerce Operation Guidelines 2021. They have also encouraged the use of Digital Financial Services (DFS) and Mobile Financial Services (MFS) in CMSME financing, along with the development of QR code and chatbot services for CMSMEs. These initiatives help to establish a digital footprint for CMSMEs in Bangladesh. However, they are not yet sufficient for the full development of MSME sector participants.
The integration of digital technology and engagement of MSMEs will get pace if a specific roadmap for the digital transformation can be developed. Some prolific recommendations to sketch the roadmap for digital transformation of MSMEs are pointed out below.
Comprehensive policy on Digital Transformation for MSME. A comprehensive policy on Digital Transformation for MSME must be adopted, where the process, technological investment, employment of skilled manpower, service propositions etc. are to be mentioned. Additionally, the government must develop a Digital Trade Policy and embrace digital trade in international trade services to streamline the trade process in a shorter frame.
Development of Digital Infrastructure. Optimal level infrastructure development such as reliable internet connectivity, easily accessible software management tools for MSMEs must be ensured. Market competitors for software development and management (Automation Company) will be increased to minimise the automated software and tolls installation and management. Notable presence of consultancy firms for MSMEs in the marketplace should be confirmed. Nano loan for procuring digital devices for marginal MSMEs should be launched by the banks that may be repaid by monthly instalments.
Digital Education. An awareness building programme on digital financial literacy for MSMEs should be undertaken. The Technical Training Institute must provide training on Digital Transformation for MSMEs to youths either free of charge or at an affordable cost.
Digital Marketing Techniques for MSMEs. MSMEs solidifying their business footprint through digital platforms like Facebook, Instagram, Tiktok and different sites for e-commerce should be encouraged with tax benefits. Organisations supporting MSMEs should develop training programmes for them in line with international standards.
Incentive for MSMEs and Fintech Developers. The central bank should launch an incentive package to support the financing of MSME transformation. Additionally, an incentive package for financing fintech developers who innovate MSME processes should be implemented. Digitally transformative MSMEs that export their products abroad should be encouraged through concessional duty benefits provided by the government. These measures will motivate MSMEs to contribute more significantly to increasing the country’s foreign reserves.
Investments and Rewards. The Chamber of Commerce and Industries, along with other member organisations, must embrace digital transformation and invest in it to develop marginal MSMEs. They should annually highlight and award the top 10 transforming MSMEs in the category of successful digitally transformative enterprises to encourage visible impacts of digital transformation.
Bangladesh is a country where eagerness to harness technology, openness to innovation, strong growth prospects, and expanding employment opportunities create a favourable environment for economic success. To ensure inclusive benefits, the Fourth Industrial Revolution (4IR or Industry 4.0) also presents numerous prospects for MSMEs, such as boosting efficiency in business processes, accessing global markets, and diversifying customer engagement — all of which can be a strong fit for Bangladesh. By adopting emerging technologies like AI, data analytics, and others, MSMEs can drive innovation and make data-driven strategic decisions more rapidly. Therefore, digital transformation for MSMEs is a blessing for the digital future, not a hazard.

The writer is a banker and certified Financial Modelling & Valuation Analyst (FMVA). pal.sanjoy25@gmail.com