UPDATE: The full report is now available for download here.

Digitalization presents both opportunities and challenges for micro, small, and medium enterprises (MSMEs) in emerging markets. Digital tools can increase business efficiency and reach, but also increase exposure to misinformation, fraud, and cyber attacks. Such “digital downsides” can lead to financial losses, reputational damage, loss of customer trust, and other challenges that hinder MSMEs’ ability—and desire—to participate in the digital economy. In this post, we’re previewing a soon-to-be-released report that DAI authored about the economic impact of misinformation and other digital harms on MSMEs in Kenya, India, and Cambodia.

As part of our research, and with the help of our in-country local partners, we asked 85 business owners about their understanding and awareness of misinformation and other digital downsides and the impact of these experiences on their businesses. We further wanted to understand the types of digital tools (social media platforms, messaging services, digital payment devices, etc.) that business owners in lower- and middle-income countries (LMICs) use and what gaps exist that could be filled through training or by government, private sector, nonprofit and other actors. Lastly, we uncovered how misinformation factors into a business context, rather than an electoral or public health context (which is how misinformation has typically been studied).

Photo: Unsplash.

Report Highlights

Our study found that even though digital tools greatly benefit MSMEs in emerging markets, without the resources to address misinformation, scams, and other digital risks, those MSMEs are vulnerable to financial losses, damaged reputations, and/or loss of customer trust that inhibit their participation in the digital economy.

We also found that MSMEs in LMICs view misinformation differently than how scholars and practitioners might view it. For the MSMEs we interviewed, misinformation is synonymous with scams, fraud, hacking, and other digital harms, because in the act of carrying out these activities, a malicious actor provides false or misleading information that harms the business owner. These interviews provide greater insight into MSMEs’ online experiences and their need for mitigation tools and strategies to securely operate their businesses online.

We found the following:

1. For MSMEs, “digital harms” = financial harms, misinformation, and technical harms. Through key informant interviews, MSMEs expressed examples of harm falling into three main categories: Financial harms such as scams, nonpayment for goods or services, and clickbait messages; misinformation such as COVID-19 misinformation, false rumors, or false reviews; and technical harms such as hacking a companies’ social media accounts or creating a clone account.

2. Financial loss was the most reported digital harm—with 30 percent of MSMEs in Kenya, 50 percent in India, and 30 percent in Cambodia—as the most common harm resulting from operating online. Financial loss not only consisted of the stolen money, but also affected advertising campaigns and outreach to new customers.

3. MSMEs are losing trust in online tools as a result of misinformation. Businesses also reported industry rumors where misinformation resulted in the devaluation of a product, sowed mistrust among customers, and negatively impacted the companies’ revenue. The reach of and speed with which misinformation can spread and ruin companies’ brands, as well as the overall difficulty businesses faced in seeking recourse, made the MSMEs we interviewed wary of using digital tools altogether.

“The response is always the same. Algorithms read it and don’t find anything wrong. One of those screenshots was a proper chat screenshot of someone abusing me. But nothing happened. It is disheartening. I think there should be a person involved rather than the algorithm.”—Rouble, Madam Sweet Tooth, India

4. Still, MSMEs continue to operate online… albeit cautiously. About 30 percent of respondents indicated they took no mitigation measures when confronting digital harms, often because, in their opinion, they did not know where and how to do so or felt that their business was too small to be targeted by scams, fraud, misinformation, and hacking in the first place. Furthermore, about 70 percent of MSMEs reported a lack of confidence in their ability to protect their businesses.

5. MSMEs want to learn how to mitigate digital risks, but they need support in doing so. Respondents specifically pointed out the need for training on identifying and reacting to instances of misinformation, mitigating the impact of frauds and scams, and securing their business’ information online, as well as more holistic training on cybersecurity and media literacy.

Our Recommendations

As a result of our research, we recommend that development practitioners and other agencies:

1. Invest in comprehensive digital literacy solutions that incorporate cyber hygiene and other skills to combat misinformation. Incorporating countering misinformation tactics into cybersecurity training can offer a more holistic cache of digital safety and security lessons, thereby reducing training redundancy and generating more return on investment for businesses.

2. Improve the accessibility and availability of digital safety resources. Many social media companies already offer MSMEs resources on their platforms through business skills and digital marketing training. Platforms should also transparently share information on potential digital harms affecting MSMEs’ value chains, their consumers, and the way they use social media to advertise their products and services, while simultaneously offering resources and clear reporting guidelines when MSMEs encounter digital harm.

3. Invest in community-based approaches and networks. MSMEs in developing countries often rely on their local networks to support their company’s response to digital harms. Investing in local training or resource hubs offers a scalable approach to reach smaller, newly online businesses. These trusted allies offer influence and reach, both as an awareness-raising venue to verify or share information about digital risks and as a response force to support those businesses that have been impacted.

4. Assist governments to sustain their critical role in the business innovation and protection ecosystem. To nurture MSME economic growth, governments must take proactive steps to help businesses protect themselves from the negative effects of digitalization. Such actions could include coupling online business registration requirements with mandatory digital literacy and risk-awareness training or establishing accountability mechanisms such as hotlines to lodge complaints, report scams, or flag inaccurate content.

There’s much more to say about this research, the business owners we interviewed, and the concrete steps we can take to build MSME resilience to digital harms. This is just a taste of the insights we’ve uncovered. The full research report will be published in mid-February and shared here. And for more resources on building resilience against digital harms, read this post.