Developing Asia can adopt integrated policies to harness digital transformation as digital technologies empower small and medium-sized enterprises (SMEs), offering significant opportunities to promote inclusion, resilience, and sustainability, according to a report by the Asian Development Bank (ADB).
The report, Asian Development Policy Report 2025: Harnessing Digital Transformation for Good, said digital technologies enable SMEs by improving the delivery of key services such as finance, overcoming conventional barriers, and increasing resilience.
“For instance, financial technology and platforms improve SMEs’ access to finance and business networking. Digital payments, in particular, have gained significant penetration among underbanked groups. Around 66% of digital lending customers in Southeast Asia are unbanked or underbanked. Moreover, digital technologies expand SMEs’ access to both domestic and foreign markets, reduce transaction costs, and improve process efficiency,” it said.
The report said advances in digital technologies have the potential to promote inclusion in the region by removing constraints and fostering innovative and scaled solutions to facilitate entrepreneurship and business creation; and lower barriers and costs, enabling small firms to engage in trade and expand internationally.
These also offer opportunities to promote environmental sustainability in the region as inequality and vulnerability to extreme weather events remain key challenges for developing economies in Asia and the Pacific, it said.
“However, if not managed well, digital transformation could exacerbate inequality and compromise environmental sustainability. The realization of benefits from digital technologies depends on how effectively digital transformation is managed and governed,” it added.
To harness digital transformation for inclusive and sustainable development, the report said developing Asia can adopt integrated policies comprising three pillars –an overarching national digital strategy that integrates objectives for inclusion and sustainability, policy interventions aligned with inclusion and sustainability, and focus on engagement with a broad range of stakeholders.
“Currently, most regional economies view digital transformation and inclusive and sustainable development as separate priorities. A high-level national digital strategy can align and coordinate policy actions across ministries and agencies,” it said.
The policy interventions are policy tools addressing market and equity failures while incentivizing innovation to promote inclusion- and sustainability-friendly digital solutions, such as platforms, smart technology, and disaster risk management tools, it added.
The report cited examples of incentives to promote inclusion in developing Asia, including the Philippines which is its government’s provision of a free Wi-Fi access program for all, with a focus on geographically isolated and disadvantaged households.
Further, the report said collaborating with civil society and local communities can leverage their local knowledge and trust, which is needed to successfully roll out educational and training initiatives in targeted communities.
“Additionally, governments can engage in cross-border collaboration to harmonize international digital standards, encourage data flows, and support trade. They can also leverage financial and knowledge resources from international organizations,” it said.
“Regional economies need to consider economy-specific circumstances when prioritizing policy implementation. Policy choices can be guided by their relative levels of digitalization, inclusion, and sustainability,” it added.
