Expanding MSME Ecommerce in Developing Countries: Digital and Ecommerce Policy Index 2024

Nextrade Group, October 2024

Ecommerce – the sale and purchase of goods and services online – has opened tremendous new opportunities for micro, small, and mid-size enterprises (MSMEs) to export and grow. Online seller MSMEs can utilize their own online stores and global marketplaces such as Amazon, Mercado Libre, Jumia, Etsy, eBay, Shopee, Upwork, and Freelancer to reach new markets and transact with hundreds of millions of potential customers around the world. Creators and influencers who provide and promote content can leverage YouTube, Patreon, Instagram, and many other platforms to sell their content and marketing services to fans and audiences worldwide. The growth of ecommerce has also promoted the growth of ecommerce ecosystems – payment platforms, marketplaces, logistics services, digital marketing services, and more across the developing regions.   

Policymakers around the world have sought to promote MSME ecommerce by adopting a wide variety of digital policies and practices, such as data privacy and consumer protection rules, MSME ecommerce development programs, and MSME financing initiatives. Today, they face new policy challenges, for example around AI and cloud policies and cybersecurity practices supportive of MSMEs in ecommerce.

The purpose of this report is to support especially developing country policymakers to track where their countries are on the journey of adopting policies conducive to MSME ecommerce. This report assesses the adoption of 75 specific policies conducive to MSME ecommerce in 14 major policy areas in 60 countries, most of them developing and emerging nations in Africa, Asia, the Middle East, and Latin America. The report is supported by the USAID-backed Alliance for eTrade Development II (eTrade Alliance), and updates and expands on the eTrade Alliance’s 2018 and 2021 policy reports. This report includes:

• A mapping of 75 regulations, policies, and practices conducive to MSMEs’ use of ecommerce in 14 main policy areas in 60 countries.

• New mapping on the adoption of policies shaping AI and cloud computing.

• Ecommerce and Digital Policy Index that enables countries to measure their adoption of policies conducive to MSME ecommerce and compare it to the adoption of other countries.

• Comparisons between countries’ adoption of pro-ecommerce policies between 2018, 2021, and 2024.

• More than 50 brief case studies of good policies and practices to promote MSME ecommerce across the different policy areas.

• Policy guidance and recommendations for developing countries to promote MSME ecommerce.

The main findings of this study are as follows:

• The Ecommerce and Digital Policy Index developed in this report is strongly correlated with countries’ development levels. Overall, Western European, East Asian, and Southeast Asian economies have adopted about 60-80 percent of the good policies and practices mapped here, while countries in Latin America, South Asia, and Middle East and North Africa have adopted around 55 percent, and most Sub-Saharan African and Central Asian countries have adopted some 40-45 percent.

• Some countries, such as Rwanda, India, Egypt, Indonesia, Thailand, Philippines, Malaysia, Brazil, China, Mexico, and Chile, notably outperform their peers at the same level of development in the adoption of the mapped policies.

• Most countries have adopted the basic policies that regulate online transactions. By now, most countries have adopted electronic transactions and signatures laws, digital strategies, and digital payments regulations, and implemented programs and initiatives to support MSMEs’ ecommerce skills and export capabilities. Almost 60 percent of the mapped countries have also put in place online platforms that allow consumers to understand their rights and submit complaints related to ecommerce purchases, and 10 countries have piloted Online Dispute Resolution platforms that accelerate and scale the resolution of disputes. Over 50 percent of the mapped countries have also launched Fintech sandboxes to promote experimentation with innovative financial services and products that are useful for MSMEs. Almost 85 percent of the mapped countries have now assigned 4G spectrum, and a growing number are rolling out 5G, with countries such as Japan, South Korea, and China already working toward 6G. More than 80 percent of the 60 mapped countries have also adopted cybersecurity strategies and laws, though there is significant disparity in incident and crisis management.

• Especially Sub-Saharan African, Central American, South Asia,n and Central Asian countries still lag behind their peers in the adoption of the more sophisticated digital policies, AI strategies, and even some basic trade facilitation measures key to MSMEs in ecommerce. Policies that have yet to be adopted widely among the mapped countries include safe harbors that provide internet intermediaries partial immunity from user-generated content and that are key to promoting online ecosystems; key cross-border paperless trade measures; and AI strategies and cloud-first policies conducive to the growth of ecommerce ecosystems. There are also some signs of digital protectionism, such as data localization policies and new taxes on digital transactions.

• Since the Alliance’s last policy mapping in 2021, there have been new issues, such as AI policy in the ecommerce policy landscape. A growing number of both advanced and developing countries have launched in recent years policies and strategies to address emerging technologies like AI and cloud computing. The adoption of AI strategies has advanced especially in East and wealthier parts of Southeast Asia, Latin America, as well as North Africa.

• Regional policy convergence is strongest in East and Southeast Asia and South America, and weakest in Sub-Saharan Africa and Central Asia. An analysis of one country’s policies is not sufficient in a world where MSMEs need to meet digital regulations in multiple markets, for example, in proximate markets. A look at the similarity or convergence of digital policies among regions indicates that East Asia (China, Japan, South Korea) and Southeast Asia have the highest policy convergence, while Sub-Saharan Africa and Central Asia are most fragmented.

Countries are at different stages of the journey of the adoption of pro-ecommerce policies, and thus have different policy priorities. For example (Table 1):

• Countries in the bottom quartile of the mapping here (countries in Sub-Saharan Africa, Central Asia, and Bolivia, Honduras, Guatemala, Myanmar, and Lebanon) need to focus on digital infrastructure and connectivity for MSMEs and enabling consumers to access reliable internet connections to sell and shop online, adopting and improving consumer protection and cybersecurity laws for there to be trust in online shopping, and promoting the adoption of digital payments.  

• Countries in the next two quartiles (emerging markets across regions) can focus on promoting their ecommerce ecosystems, interoperable payments and financial services, paperless export and import processes, and digital trade and economy agreements that lock in good digital policies and promote cross-border data transfer. These countries can promote the digitization of their economies through digital payments acceptance, the promotion of fintech ecosystems, and digitized trade processes.

• Countries in the top quartile (advanced economies, East Asian and some Southeast Asian economies, and Brazil, Mexico, and India) have many policies and good practices in place to support MSME ecommerce. These countries can keep driving innovation within their ecommerce ecosystems, including promoting the use of AI and cloud computing, and diffusing 5G and moving to 6G.