The missing middle in Asia’s finance puzzle: AVPN CEO on MSMEs, capital and capability

Asia's small and medium businesses are facing a financing problem that may run deeper than a shortage of capital. AVPN, which describes itself as Asia’s largest social investing network, brings together investors, philanthropies, governments and other development stakeholders to channel capital and resources towards social and development priorities across Asia. In an interaction with The Economic Times Digital, Naina Subberwal Batra, CEO, AVPN, discusses the financing and skilling gaps facing MSMEs, the role of AI and blended capital, and why she believes coordination, rather than capital alone, will determine how effectively Asia addresses its development needs. Edited excerpts:

ET: Around 96% of businesses across Asia Pacific are micro, small and medium enterprises, yet they remain the least served by formal capital and skilling systems. In your reading, is the binding constraint access to finance, or is it something further upstream, like capability and market linkage?

Naina Subberwal Batra (NSB): I would resist framing it as one or the other, because the evidence suggests they are the same problem observed at different points. The most telling data point in India is not the size of the credit gap itself, but its composition. The MSME Pulse Report by TransUnion CIBIL and SIDBI found that of the 8.7 crore registered MSMEs, only 41% have ever accessed formal credit, even as outstanding commercial credit grew 14% year on year to reach ₹65.8 lakh crore. More revealing still, lending to individuals has grown at a 22% CAGR against 14% for enterprise credit. Business owners are increasingly borrowing in their personal capacity rather than as enterprises.


NITI Aayog's report on enhancing the competitiveness of MSMEs also identifies limited awareness among enterprises alongside the financing shortfall. An enterprise without organised records, a demonstrable order book or a stable buyer relationship is fundamentally difficult to lend to.

So capital does not come before capability. It often follows it. The binding constraint is upstream, and the credit gap is largely the visible expression of it. This is why at AVPN we have consistently argued that capital alone rarely moves the needle for small enterprises, and why our work pairs financing with skills, market access and enterprise readiness.

ET: AVPN's AI Opportunity Fund has a dedicated track for MSMEs, targeting 100,000 across Southeast Asia. What does AI skilling actually look like for a small business owner with limited digital exposure, and what have you learned about what works and what does not?

NSB: The most important thing we have learned is that for a business owner running a small retail operation or a workshop, the entry point is never the technology. It is a task they already find difficult, whether that is writing product listings, responding to customer queries after hours or working out which of their lines actually makes money.

In the MSME track we run with the ASEAN Foundation through the AI Opportunity Fund, with support from Google.org and the Asian Development Bank, the modules are built around those tasks, from streamlining operations to improving online sales to managing finances. The true measure of success lies in whether they are still using a particular tool months later because it saved them an afternoon.

What does not work is a single regional curriculum pushed outward, which is why we have deliberately not built one. AIM ASEAN is delivered by 10 local implementing partners across the 10 ASEAN member states, with each adapting the material to the sectors and conditions they work in.

The AI Opportunity Fund has reached over 850,000 workers and 63,000 small businesses across Asia-Pacific with local implementing partners and training providers. The second lesson is that adoption stalls unless training is embedded into systems that already reach people at scale. For instance, integrating AI modules into the existing cascade training structures of the Government of Uttar Pradesh's AI Mission rather than running a parallel programme.

Skilling at this scale is less about the content than about finding the existing pipes and putting something useful through them.

ET: MSME financing in India tends to sit at two extremes, grant support at one end and commercial lending at the other, with very little in between. What role can catalytic or blended capital play in filling that middle, and are there models from elsewhere in Asia that India could adapt?

NSB: The middle is missing because the risk in that segment is real. A lender looking at a first-time borrower with thin records is being asked to price something they cannot see, and the rational response would be hesitation.

Catalytic capital does not solve that by virtue of being more readily available. It solves it by absorbing the part of the risk that deters commercial capital from participating, and then letting commercial capital come in at a point that is more viable.

India already has the architecture for this. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), established by SIDBI and the Ministry of MSME, has been doing precisely this for over two decades, and NITI Aayog's assessment calls for it to be revamped and expanded rather than replaced.

The Union Budget for 2026 took this a step further by extending guarantee cover to invoice discounting through the Trade Receivables Electronic Discounting System (TReDS) and creating a Rs 10,000 crore SME Growth Fund for growth-stage enterprises. That equity layer matters because equity on a balance sheet is what makes debt underwritable. A modest equity injection can support several times its value in lending.

Where philanthropy and impact capital can add most is in the layer beneath all of this, funding the demonstration that a segment is viable before commercial capital will look at it. The International Finance Corporation's Catalytic First Loss Guarantee Facility is instructive because its purpose is to prove the commercial viability of underserved segments such as women-owned and rural enterprises.

On models from elsewhere in Asia, India is often the exporter rather than the importer. India accounts for a majority of the outcomes-based financing activity recorded in the region, and instruments developed here, including impact bonds in skilling and education, are being studied across Asia.

ET: This year's theme is A Blueprint for Action in Asia. Why a blueprint, and why now? What has changed in the region that makes coordinated action more urgent than it was five years ago?

NSB: Two things have changed materially. The first is that the external capital the region had grown accustomed to is contracting. Official development assistance fell sharply in 2025, and much of what remains is being redirected. Five years ago, it was possible to treat Asian capital as complementary to flows from elsewhere. That assumption no longer holds, and the region has to fund a much larger share of its own development.

The second is scale. Asia is confronting a $26 trillion financing need through 2030 to sustain growth, address poverty and respond to climate change, alongside a $1.5 trillion annual gap against the Sustainable Development Goals. Those are not numbers that any single funder, government or instrument can close.

The word blueprint was deliberate. A blueprint is not a manifesto. It is a working document that assumes something is going to be built, or that something that has been built, tested and proven can serve as a guide for other regions or problem statements.

We felt the region had reached the limits of what convening alone achieves. There is no shortage of shared analysis about what Asia's problems are. What has been missing is the connective bridge of getting a foundation, a corporate, a development finance institution and a government or system to align around the same outcome, with capital moving in a sequence that makes sense and addresses a systemic issue.

Fifteen years into AVPN's own journey, our conclusion is that the constraint is rarely that of intent. It is the architecture.

ET: AVPN's position is that Asia's constraint is coordination rather than a shortage of capital. The region needs an estimated $26 trillion by 2030 and is home to over 1,000 billionaires holding around $4.7 trillion. What does the coordination problem look like in practice, and what would fixing it require?

In practice, it looks like a good project facing barriers to finding capital that is actively looking for it.

A philanthropic funder may be willing to take early risk but have no visibility of the commercial investor who would come in at the next stage. So it declines rather than fund something that will stall.

A development finance institution may have capital available but need a first-loss layer that nobody has assembled. A state government may have a pipeline of investment-ready projects but no counterpart who can aggregate them into something of institutional size.

Each actor behaves rationally and the collective outcome is that money does not move. That is a breakdown of coordination, not a scarcity of capital.

Fixing it requires investment in the connective infrastructure between actors, which is harder to fund than either grants or deals because nobody owns it.

Three things in particular: translation, sequencing and credible pipelines. Different entities bring different sets of risks and use different language to articulate them. The right structures and actors also need to be in place to bring concessional, catalytic and commercial capital together at the appropriate stages. And institutional capital needs a clear set of opportunities that are ready for investment.

The Maharashtra climate investment programme we announced at the AVPN Global Conference 2026 is an attempt to do this in practice. It has taken a $1 billion pipeline through to an actual first transaction rather than stopping at the announcement.