Factors Affecting Micro, Small, and Medium-Sized Enterprise Development in Developing Asia: Findings from a Probabilistic Principal Component Analysis

Abstract

To identify factors affecting micro, small, and medium-sized enterprise (MSME) development, this paper proposes a probabilistic principal component analysis method that works despite current data limitations. The estimation results suggest that sound MSME credit markets, diversified financing options, support for new businesses and job creation, and active MSME participation in global marketplaces play a critical role in ensuring a smooth business recovery from various crises and shocks affecting developing Asia and the Pacific.