Driving innovation: The G20's role in supporting startups and MSMEs

Ordinarily, one might assume that startups and Micro, Small, and Medium Enterprises (MSMEs) in advanced economies are almost destined to thrive, shielded from the vulnerabilities that cripple their peers in underdeveloped nations. The logic is clear, developed nations boast the “perfect” ecosystem funding, infrastructure, markets, and institutional support that should tilt the odds in favour of success.

The 2025 Global Startup Ecosystem Report (GSER) highlights ecosystems such as Silicon Valley, New York, London and Tel Aviv where resources and mentorship converge to fuel innovation. Yet even there, survival is far from guaranteed, with startups failing due to poor market fit, weak financial planning or lack of adaptability. This reveals a critical insight; resilience, adaptability, and innovation particularly in areas like AI, often outweigh structural advantages. The playing field is uneven, unpredictable, and unforgiving, reminding us that entrepreneurial survival is earned, not inherited.

One thing that’s clear is that in G20 or non-G20 countries, startups and MSMEs have proven to be the backbone of these economies. A 2021 report by Organisation for Economic Development and Cooperation (OECD) titled “Navigating the storm: MSMEs Financial and Digital Competencies” highlighted that MSMEs represent about 90% of all businesses across the 39 OECD, along with G20 and non-G20 member countries surveyed. In high-income G20 economies, MSMEs account for 50% of private sector GDP. In emerging and developing economies (many of which are non-G20), formal MSMEs contribute up to 40% of national income (GDP). This figure is much higher when including informal MSMEs.

Earlier this year, 22 On Sloane was appointed as Secretariat for Startup20 (SU20).  SU20 is the G20 engagement group for startups, MSMEs, innovators and entrepreneurial ecosystems, representing diverse voices from across G20 member states. As part of its mandate, SU20 has five task forces that are currently working to develop policy recommendations. The task forces are: 

• Finance and Investment Taskforce – Mobilising capital and innovative financing models for startups and MSMEs. 
• Foundation and Alliance Taskforce – Building institutional frameworks and partnerships to strengthen innovation ecosystems. 
• Trade and Market Access Taskforce – Expanding access to domestic and international markets for entrepreneurs. 
• Inclusion and Sustainability Taskforce – Embedding social inclusion, gender equity and environmental sustainability into entrepreneurship policies. 
• Township and Rural Entrepreneurship Taskforce – Advancing equitable opportunities and resources for entrepreneurs in underserved and geographically marginalised areas.

Over the past few months, many ideas and exchanges have taken shape. These include proposals to integrate blockchain credentialing with digital public infrastructure in underserved communities, and  establishing a G20-endorsed Global Startup Economy Fund to capitalise early-stage innovation across member and non-member states. All these ideas are aimed at empowering small businesses, not just in G20 countries, but in many other developing economies. It is also recommended to establish a Global Common Market (GMC) to simplify and enable global trade for startups and MSMEs across the G20 countries.

These draft recommendations are strongly supported by available evidence on the challenges experienced by startups and MSMES globally. The 2021 OECD report highlighted that MSMEs account for 50–60% of private sector employment on average across OECD countries. In some G20 countries, such as Brazil, G20 countries had slightly higher established business ownership rates than non-G20 countries. In developing economies (many non-G20), MSMEs generate 7 out of 10 formal jobs.

Globally, they provide more than 50% of employment. Access to finance is still a key constraint for MSMEs. In 2012, MSMEs in G20 nations received only 6% of overall investment, with a significant proportion from bank lending. The financing gap for MSMEs in emerging markets and developing economies was estimated at $5.7 trillion in 2019. Access to finance is the second most cited obstacle to growth for MSMEs in emerging markets.

A report that 22 On Sloane did with the World Bank in 2019, put MSME finance gap in South Africa at $6 billion for the formal sector and $24 billion for the informal sector. These figures highlight the importance of the suggested recommendations, especially the focus on funding sources, digital infrastructure, and a global common market, all of which have the potential to improve cross-border trade, financial inclusion, and MSME growth.

The OECD report highlighted that G20 countries generally show an increasing trend in entrepreneurship rates. The stable business climate may be more conducive to allowing established businesses to grow. Non-G20 countries often have higher startup rates and a higher rate of increase in new businesses than G20 countries, with some exceptions.

This suggests that even well-developed economies can be closed to new entrants, limiting opportunities for innovation and job creation. For the G20 to be truly impactful, it is crucial to recognise the opportunities that startups and MSMEs present to the world and to actively consider the recommendations from SU20.

If we are to solve the global unemployment challenges, migration and other social ills we face, then we must ensure that startups and MSMEs are at the forefront of every decision we take at the G20.

Kizito Okechukwu is the Head of Secretariat for the Startup20 (SU20) of the G20 and the Executive Head at 22 On Sloane, Africa’s largest startup campus.

BUSINESS REPORT