The Asian Development Bank (ADB) and the Mastercard Impact Fund, administered by the Mastercard Center for Inclusive Growth, announced a landmark partnership to promote financial inclusion and access for micro, small and medium enterprises (MSMEs) across the Asia-Pacific region.
The collaboration will leverage a $5-million grant from the Mastercard Impact Fund to support up to $1 billion of ADB financing to financial institutions for lending toward MSMEs.
“MSMEs are the backbone of economies across Asia and the Pacific, yet many struggle to obtain adequate finance,” said ADB vice president for market solutions Bhargav Dasgupta.
“By combining the resources and expertise of ADB and Mastercard, this facility will unlock the potential of MSMEs, particularly those run by women or supporting climate finance, empowering businesses and fostering inclusive and sustainable economic growth across the region.”
The Asia-Pacific region accounts for 52 percent of the total emerging market MSME financing gap globally, which is estimated at nearly $2.5 trillion.
In this region, 43 percent of formal SMEs are either unserved or underserved by financial institutions.
About 70 percent of women-owned MSMEs face significant challenges in securing financial support.
Harvard Business Review reported that in 2018, only 4 percent of total investment funds went to all-women businesses, declining to 2 percent by 2021. The volume of transactions involving all-female businesses remained stagnant at just 6 percent.
The Mastercard Impact Fund aims to accelerate ADB’s efforts to deliver financing to MSMEs across Asia-Pacific, including the Philippines, by providing a $5 million grant in the form of risk-reducing capital, incentives, and capacity building support to financial institutions.
The mitigation of credit risk and technical assistance support is expected to catalyze lending by financial institutions toward unserved or underserved MSMEs.
MSMEs account for 99 percent of all business establishments and employ roughly 63 percent of the country’s workforce in the Philippines. However, despite being considered the economic backbone of the country, many MSMEs remain financially excluded. This sector is among the underserved segments by financial institutions, underpinning the need for increased MSME support.
Jon Huntsman, vice chairman of Mastercard and board director of the Mastercard Impact Fund, said, “This partnership deepens the work we’re doing in the Asia-Pacific region to support entrepreneurs and small businesses, which are the lifeblood of communities and economies. By bolstering resilience to climate and economic shocks, we are putting more people, communities, and entrepreneurs on the path to financial inclusion and prosperity.”
Ari Sarker, president of Asia Pacific, Mastercard, said that despite their long-established significance to economies, MSMEs continue to be challenged by access to credit – the fundamental resource which can catalyze growth for them and their economies. For growth to be truly inclusive, closing the MSME funding gap needs to be a core focus for both public and private sectors. This partnership is a meaningful step in that direction.”
At least 50 percent of ADB’s total financing will go toward women-led or owned MSMEs and climate finance among small businesses deployed over a period of four years. The initial target markets include India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, and Georgia.
The partnership between the Mastercard Impact Fund and ADB marks a significant step toward addressing critical MSME financing gaps in the region. By leveraging their combined expertise and resources, both organizations are committed to fostering sustainable growth and inclusive prosperity for MSMEs throughout Asia and the Pacific.
