How Unicorns Are Helping MSMEs to Spread Business In the last two years, powerhouses like Go-Jek and Grab have launched digital entrepreneurship workshops for MSMEs. What's the catch?

Often regarded as the engine of the economic growth, the micro, small and medium-sized enterprises (MSMEs) have now grabbed the attention of startups and unicorns in Asia. From Singapore to Indonesia, unicorns like Grab, Ovo, Go-Jek, and platforms like WhatsApp are lending support to small businesses that are looking to spread business across borders. In Southeast Asia alone, MSMEs constitute the backbone of ASEAN economies with about 64 million enterprises strong throughout the region. They contribute a significant share of total establishments of between 88.8 per cent and 99.9 per cent, and a share of total employments between 51.7 per cent and 97.2 per cent, according to the Association of Southeast Asian Nations, on which a number of unicorns are betting big.

While some of the major Asian economies are moving towards an e-payment revolution, small merchants across the industries are vying for change. Surprisingly, SMEs are providing a lucrative market for Asia's blossoming online payments platform. To reduce the financial distress on MSMEs, a large number of fintech players have sprung up in countries such as Indonesia, Singapore, China, India, Vietnam and the Philippines.

Agile Fintech

A report by research and advisory firm RedSeer says mobile wallets have seen exceptional growth in Indonesia in the past years and major players seem to have carved out their niche. RedSeer identified Go-Jek's Go-Pay, Ovo, Telkomsel's TCash, and Doku as the major players in this category and created an infographic that shows the types of payments each wallet is used for.

Go-Pay leads in mobility services, which is a natural consequence of the wallet being fully integrated with GoJek's ride-hailing app. While its rival Go-Jek is upping its game in fintech, Singapore's Grab has also started a partnership that aims to better serve the needs of small and medium businesses, social sellers and customers. The company partnered with Ninja Van, a logistics service startup, which will be available in the Grab application through GrabExpress in the second half of this year and will be rolled out in Southeast Asia in stages.

Ovo, whose wallet is integrated into ride-hailing platform Grab, is also used for mobility services, but leads in the "offline" category because Ovo had a stronger focus on building a network of offline merchants from the start.

In an interview, the company's chief executive officer Jason Thompson attributed Ovo's success to, among others, the modern organized retailers. "We have had over 300,000 retailer outlets join us this year," he said.

"The local retailers, the merchants, the convenience stores are absolutely critical to our success, and it's critical to the future of Indonesia and financial inclusion," said Thompson. A major use case, especially for smaller e-wallets, is that of "recharges", where mobile wallets facilitate mobile phone and data package purchases.

The report by RedSeer forecasts that in five years, offline channels, not mobility, will account for the largest share of e-wallet market. And this shift will bring new opportunities for existing and new players.

Go Global

Similarly, WhatsApp Pay has plans to tap India's 50 per cent of MSMEs. A report, titled "Credit Disrupted: Digital MSME Lending in India", by consulting firm BCG and impact investor Omidyar Network shows there are close to 60 million MSMEs in India, which will have improved access to credit with WhatsApp Pay.

At present, 45 per cent of Indian MSMEs borrow credit from informal sources because they do not have a transparent transaction history. The report identifies that solutions like WhatsApp Pay and Google Pay, would incentivise MSMEs to go digital because doing so would allow them to maintain a steady record of electronic transactions that will improve their creditworthiness. This, in turn, will make it easier for them to borrow credit from formal sources like banks and NBFCs, possibly at better rates.

Not just that, in the last two years, giants like Go-Jek, Grab and Google have launched digital entrepreneurship workshops for MSMEs in an effort to drive digitalization.

Go-Jek launched Go-Jek Wirausaha in 2018. The workshop trained 2,200 MSMEs last year and aims to train 35,000 MSMEs this year. Representatives from MSMEs learned basic business skills in finance, management and marketing during the two-day workshop, as well as an introduction to Go-Jek's services like the Go-Pay e-wallet facility.

(This article appears in the June 2019 issue of Entrepreneur Magazine. To subscribe, click here. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)