Digitizing Your Small Business

Digitizing Your Small Business

Executive summary

As the digital revolution transformed micro- and small enterprises (MSEs) around the world, it also changed how small business support can and should be delivered. MSEs are essential agents of inclusive growth, and the digital revolution has fundamentally affected them. As digital technologies present MSEs with new opportunities and challenges that have been accelerated by the COVID pandemic, their support needs have also shifted. In the digital age, meaningful support not only provides MSEs with information and resources, but does so in new ways, using digital channels. For small business support to be effective and sustainable through the 21st century, understanding how digital technologies are changing the landscape will be paramount.

This paper identifies new digital-first players and channels supporting small business that have emerged and makes suggestions for how new and established actors can work together more effectively. To assess which changes digital transformation has brought about, we trace the lineage of MSE support from traditional to contemporary, digitally enabled methods. We highlight that traditional MSE support has not ceased to matter. Instead, these ways have often been transformed, and the range of support actors has broadened. For this expanded ecosystem to have impact, greater mutual awareness and new partnerships are required.

To capture new digitally enabled ways of MSE support as exhaustively as possible, we compiled and coded a corpus of 650 support organizations and initiatives. We first crowd-sourced a database of 80 organizations active in all regions of the world by asking a group of subject-matter experts to name MSE supporters that use digital technologies in innovative ways. Based on this list, we derived an initial set of categories of digital MSE support. We then used the stakeholder mapping of the Strive Community project (a global initiative to enhance MSE digitalization as a means for inclusive growth) to validate and refine the initial categories.

We propose five archetypal forms of digital MSE support:

  • Digital market access – most commonly offered by e-commerce platforms, helping MSEs move their offering or stock management online and to reach new customers and suppliers, often enhanced by data analytics.
  • Digitalizing operations – mostly provided by startups that offer enterprise software that improves efficiency and productivity, often through data-driven insights, while being workable within MSEs’ capacity-constrained day-to-day realities.
  • Digital credit – largely the remit of fintechs and banks, involves providing operational capital and liquidity to MSEs through digital channels, typically based on data-driven assessments of credit worthiness.
  • Digital skill building – MSE owners and staff learning to use digital technologies more effectively or to run their business in the digital age; typically provided through digital channels by a wide range of support actors, from platforms to NGOs and governments.
  • Online engagement – informing and inspiring MSEs through relatable and motivational content offered by peers, online communities, influencers, or social media.

Digital credit

Digital credit gives MSEs access to financial capital based on data-driven assessments of creditworthiness. Sometimes, small businesses use digitally provided capital for growth-oriented investments, but most digital credit solutions help MSEs maintain liquidity, bridging shortfalls in their account balance due to, for instance, delayed customer payments, long invoicing cycles, personal emergencies, and external shocks. Digital credit is part of the broader category of digital financial services (DFS), but only includes services where capital is directly provided to the MSE with an expectation that the capital plus interest will be repaid in the future. This category excludes investments where returns are tied to the enterprise’s success (revenue sharing) or where ownership shares are traded (angel investments, venture capital, stock trading) because digitally enabled investment finance remains extremely rare in the small business segment.

Digital credit makes use of digital technologies’ ability to facilitate quick and frequent interactions between MSEs and credit providers to automate and speed up the provider’s decision-making, and to trace MSEs’ behavior and to make this information visible and shareable continuously over time and for various parties. Especially where MSEs have already adopted digital wallets and payment services, it is easy for MSEs to access and use digital credit services. These can be enabled to analyze an MSE’s cash flow and payment history, sometimes augmenting this information with traditional signifiers like credit scores. Digital credit is particularly relevant for MSEs as they typically lack access to conventional forms of finance (especially bank loans), due to absent or incomplete credit histories and collateral. Digital credit uses digital technologies to establish an alternative information base.

While all digital credit services process MSEs’ trace data in some form, requirements differ as to who can sign on and which data is collected and shared and for how long (e.g., tracing communication data in addition to financial transactions). Digital credit applications can further adjust their default risk models and conditions to account for particular MSE owners’ sectoral contexts (e.g., seasonal volatility in agriculture), customer behavior (e.g., extended invoicing cycles), or the local financial system (e.g., conditions offered by banks). Given the ease and speed with which loans can be obtained, MSEs risk falling into debt traps or receiving poor credit scores. Most digital credit services therefore set limits on frequency and amount of credit.

Digital skill building

Through digital skill building, MSE owners and staff learn how to use digital technologies more effectively or how to run their business in the digital age. Supporters provide direct assistance that conveys information and knowledge on how MSEs can survive and grow in the face of digital transformation.

Digital skill building is “digital” in a dual sense. First, digital technologies have changed how knowledge can be shared. They allow for content, once it has been digitally recorded and stored, to be disseminated to unlimited numbers of recipients, anywhere, at near-zero additional cost. Digital technologies also allow one-to-one communication at distance. Second, digital technologies have changed what kind of knowledge is useful. MSEs require digital skills (i.e., knowing how to use digital technologies), but they also need strategic advice and awareness. Digital skill building is about both the use of digital technologies and conveying to MSEs what they need to know to handle the challenges and make use of the opportunities of the digital age.

The most important trade-off for digital skill building is between standardization for scale and customization for depth. Broadly, more standardized content can convey general digital skills, while individualized formats allow for strategic advice and dialogue. The most common forms of skill building use digital technologies’ dissemination potential; standardized content is recorded and made available online. Standardized content can be assembled in structured and in-depth formats like massive open online courses (MOOCs), or can come in the form of bite-size, short videos spread over social media. At the customization-for-depth end of the spectrum, micro-mentoring represents an important format. In between, myriad small group formats are being used.


Effective skill building increases MSEs’ digital capabilities, that is, their intangible assets, such as staff’s skills, knowledge, and mindsets. While content quality is important, impactful skill building ensures that MSEs actively engage with it (for instance, through gamified user journeys) and that they show behavior change. Before conveying content, effective skill builders often use diagnostics and needs assessments to determine MSEs’ existing capability levels. Deep engagement can often be in tension with scalability. Given their diversity, MSEs may benefit most from highly customized information. Formats that allow one-to-one at scale often work best: for example, flexible content that individual coaches can adapt within sessions. An important best practice to convey knowledge more effectively is to match MSEs with successful peers, as who conveys content is just as important as what that content is.

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