Pain Points and Unmet Needs for Micro-Merchants, Globally

Goals

To provide an overview of the pain points and unmet needs for micro-merchants (enterprises with less than 10 employees), using statistics and results from surveys from a global level with continental snapshots of various differences or similarities. This information will be used to inform a landscape assessment of small and medium businesses.

Early Findings

Overview

  • Micro, small and medium enterprises (MSMEs) face various pain points and unmet needs in the different phases of business including launch, expansion, business-as-usual, and growth phases.
  • Some of these pain points and unmet needs include: challenges in financing; difficulties in acquiring new and maintaining existing customers; challenges in recruiting and retaining talent; and struggling with red tape than doing actual business.
  • According to the World Bank, micro enterprises are businesses employing less than 10 permanent workers.

Pain Points and Unmet Needs in Financing for Micro Enterprises, Globally

  • Some of the pain points in financing that micro enterprises face include: access to startup funding, access to working capital, and access to cheap financing.
  • In general MSMEs are severely underfunded and face "obstacles in borrowing funds because they are small, less diversified, and have weaker financial structures."
  • A study by the International Finance Corporation (IFC) found that the total financing demand for micro enterprises in emerging markets is $882 billion, and the unmet demand is estimated at $718.8 billion, representing 81% of the potential demand from these businesses.
  • "Micro enterprises have relatively higher unmet needs from formal sources, which might be replaced with alternative sources, such as funding from friends and family, business partners, peer-to-peer markets or informal financing arrangements."
  • It is estimated that in developing countries, 21% of micro enterprises are fully financially constrained, 19% are partially financially constrained, and 60% are financially unconstrained. South Asia has the largest proportion of fully and partially financially constrained micro enterprises at 54%, followed by Sub-Saharan Africa at 52%, Europe and Central Asian region at 27%, with Latin America having the lowest proportion at 21%.
  • In relation to women-owned micro enterprises, East Asia has the highest proportion of the micro enterprise finance gap attributed to women-owned businesses at 37%, followed by the Middle East and North Africa region at 29%, and the smallest proportion is in Latin America and the Caribbean with 5%.
  • The top 5 countries with high micro enterprise finance gaps for women as a share of the total micro enterprise finance gap are: Morocco (90%), Thailand (84%), Benin (82%), Kenya (76%), and Guinea (72%).

Summary of Findings

  • From this preliminary hour of research, we determined that information on the challenges and unmet needs for micro enterprises, globally, is relatively available. We provided some insights and statistics relating to financial challenges faced by these businesses, based on a study by IFC.
  • In addition to this public search, we scanned our proprietary research database of over 1 million sources and were unable to find any specific research reports that address the stated goals.

Proposed next steps:

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