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MSME digital shift hampered by poor internet, distrust of fintech

SLOW INTERNET connections and lack of trust in financial technology (fintech) services are hindering the transition to digital technology of micro, small and medium enterprises (MSMEs), the competition regulator said.

Speaking at a webinar organized by the Asian Development Bank (ADB) Wednesday, Philippine Competition Commission Chairman Arsenio M. Balisacan said that the digital shift accelerated by the pandemic has lowered prices of goods, increased market access especially for MSMEs and allowed greater labor flexibility.

However, he said the digital space remains dominated by big corporations and smaller companies are having a difficult time expanding mainly due to poor internet services.

“Developing economies including the Philippines face challenges in making the digital shift more inclusive. MSMEs and the poor suffer unequal access to the digital platform due primarily to poor connectivity, and unstable, slow and expensive internet connections,” according to Mr. Balisacan, the government’s former chief economic planner.

Lack of awareness and trust in digital services such as fintech, funding constraints and skill mismatches are also hampering inclusive growth.

Stay-at-home orders and fears of contracting coronavirus disease 2019 (COVID-19) accelerated the shift to digital last year, allowing firms to reach their suppliers, clients and customers without the need to move around.

Mr. Balisacan noted that workers in the services sector engaged mainly in face-to-face transactions, and those in low-skilled jobs unsuited for work-from-home setups are at a disadvantage if current conditions do not improve.

“What you see is an exacerbation of existing inequalities. Without these proactive whole-of-government approaches for the online platform to fully harness digitalization as a catalyst for inclusive recovery, you will see the persistence of that inequality,” he said.

“I would note the importance of competition policy in ensuring a more inclusive digital economy,” he added.

Yasuyuki Sawada, chief economist and director general of the ADB’s economic research department, said that as the shift to digital accelerates, governments, the private sector, multilateral development banks and other agencies should cooperate in assessing their approaches to long-standing issues like infrastructure, affordability of technology and cybersecurity.

“There is going to be a permanent impact from digitalization and there are a lot of positive aspects because online platforms can enhance the functioning of the market. There’s huge potential to make (growth) more inclusive,” he said at the webinar. — Beatrice M. Laforga

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