ADB Report Highlights SMEs as Engines of Asia’s Sustainable and Inclusive Growth

The Asia SME Monitor 2025 by the Asian Development Bank (ADB) and ADBI reveals that SMEs are driving Asia’s post-pandemic recovery through digitalization, innovation, and green growth despite persistent financing and productivity gaps. It emphasizes that inclusive finance, sustainability, and regional cooperation are vital for shaping Asia’s resilient and equitable economic future.

The Asia SME Monitor 2025, developed by the Asian Development Bank (ADB) with support from the Asian Development Bank Institute (ADBI) and national research institutes, paints a vivid picture of the small and medium enterprise (SME) sector as the cornerstone of Asia’s evolving economy. The report combines rigorous data analysis with compelling regional narratives, portraying SMEs as both resilient survivors of the pandemic and key agents of Asia’s transition toward digitalization and sustainability. Covering over thirty economies, it underscores how SMEs are central to achieving inclusive growth, while still constrained by limited financing, productivity gaps, and uneven technological integration.

Recovery and Renewal After the Pandemic. The aftermath of COVID-19 has left deep marks on Asia’s economic fabric, yet the report highlights an impressive SME resurgence. Export-oriented and technology-driven firms have recovered fastest, benefiting from revived trade flows and online platforms. In contrast, micro and traditional businesses continue to struggle with inflation, supply chain volatility, and weak consumer demand. Governments from Indonesia to Japan have rolled out wide-ranging recovery programs, tax reliefs, loan guarantees, and credit lines for women-led or green enterprises. While these measures helped stabilize operations, ADB stresses the need for more structural reforms to make SME support long-term and growth-oriented, not merely reactive.

Digitalization: Catalyst and Challenge

Digital transformation emerges as a defining force in the SME landscape. Across Asia, digitalization is not just about technology adoption; it is about survival. SMEs in economies like Singapore, Malaysia, and China have leveraged digital infrastructure to expand beyond domestic markets. Conversely, smaller firms in Cambodia, Nepal, and Lao PDR remain limited by poor connectivity and low digital literacy. Fintech innovations have revolutionized financial inclusion by allowing microenterprises to access credit and payments through digital platforms. Yet, the report cautions that dependence on global e-commerce giants can trap SMEs in low-margin ecosystems. ADB advocates for homegrown digital ecosystems and public–private collaboration to ensure equitable digital participation.

Finance: The Enduring Bottleneck

Despite technological advances, access to finance remains a chronic obstacle. Traditional banks still dominate SME lending, but their risk-averse nature and high collateral demands exclude countless smaller firms. The report documents a promising expansion of alternative finance, peer-to-peer lending, crowdfunding, and venture capital, particularly in economies like Vietnam and the Philippines. Open banking and digital credit scoring are transforming lending decisions, but women-owned and informal firms remain disproportionately excluded. ADB calls for gender-responsive financial instruments, stronger credit guarantee systems, and policies that promote risk-sharing between lenders and borrowers. A shift toward data-driven lending, it argues, could democratize credit access and stimulate innovation across the sector.

Jobs, Productivity, and the Informal Divide

SMEs account for the majority of jobs across Asia, often surpassing 70% of total employment. However, productivity gaps between SMEs and large corporations persist, largely due to limited access to technology, training, and innovation networks. Programs like Japan’s SME Digitalization Support and India’s Skill India Mission are cited as best practices that link workforce development with industrial upgrading. The report devotes significant attention to the region’s vast informal sector, emphasizing that millions of unregistered enterprises, especially in South and Southeast Asia, remain outside policy frameworks. Simplified registration systems and incentives for formalization, it notes, could unlock hidden productivity potential and expand tax bases.

Greening the Future: SMEs in the Sustainability Transition

Environmental sustainability and climate resilience have become unavoidable imperatives. The report highlights that while Asian SMEs recognize the urgency of green transformation, financial and technical constraints hinder progress. In the Republic of Korea and Japan, pilot programs subsidizing energy audits and carbon footprint assessments are enabling small firms to lower emissions. In South Asia, agri-SMEs are pioneering climate-smart agriculture and solar-powered irrigation. The report insists that without accessible green finance and harmonized sustainability standards, Asia’s SMEs risk being left behind in the global shift toward low-carbon production. ADB advocates embedding SMEs in green value chains and public procurement systems to catalyze broader environmental change.

Toward an Integrated Future

Institutional fragmentation remains one of the biggest challenges to SME development. Definitions of SMEs differ across countries, complicating cross-border policy alignment. Initiatives like ASEAN’s SME Working Group and ADB’s SME Finance Hub are praised for promoting data harmonization and regional cooperation. The report concludes with cautious optimism: it predicts moderate SME growth through 2025 but warns of risks from geopolitical tensions, digital divides, and uneven green transitions. It proposes a five-pillar “SME 5.0 Agenda”, inclusive finance, digital acceleration, sustainable transition, regional integration, and evidence-based policymaking.