Small and micro lenders around the globe made the digital leap after the coronavirus pandemic. Still shuffling papers and relying on outdated systems, they were forced to change to survive. But some of their clients, the small businesses that make up the backbone of the global economy, didn’t make it.
“At the heart of this crisis are millions and millions of small- and micro-businesses that have shut their doors or are just really struggling to stay afloat,” said Beth Hurvitz, senior vice president and global head of social impact at Visa, at the recent Concordia Summit during a panel discussion called “Promoting digital equity to ensure a sustainable economic recovery.”
“These businesses are the backbone of the global economy,” Hurvitz added. “They’re 90% of the businesses, they’re 50% to 60% of global employment and disproportionately affected by the pandemic.”
The pandemic widened the global wealth gap, triggering an increase in global extreme poverty for the first time in 20 years. A web of nonprofit organizations, governments and private companies are working to harness technology to improve not only digital equity, but economic equity.
“One of the factors was limited digitization. If you can’t do business digitally in lockdowns, you just can’t do business,” said Hurvitz who spoke alongside Michael Schlein, president and CEO of nonprofit Accion, and James Scriven, CEO of IDB Invest, on the panel.
Among other measures to give small businesses a leg up, Hurvitz highlighted Visa’s efforts to “digitally enable” small businesses by helping them accept electronic payments, for example. The company said in June it had connected 16 million small- and micro-businesses, more than 30% toward a goal of 50 million Visa has targeted.
It’s a transition that is somewhat taken for granted in the developed world. The cost of facilitating digital commerce — and the psychology of changing business models — can be a challenge.
“A lot of work is in the digital transformation of small banks and micro-finance institutions that are trying to serve the base of the pyramid, and generally they are way too labor-intensive, and paper-intensive, and have underinvested in technology,” said Schlein of Accion during the panel. “Before the pandemic, the notion of digital transformation of institutions was sort of nice to have, and now it is urgent.”
Scriven of IDB Invest highlighted the use of technology as a tool to promote inclusivity.
“Technology is not an end in itself,” he said. “For us in the development space, it is a means for development. When we look at technology, we look at — what is the purpose of technology, in our case building back better our region and our world.”