Digital divergence: How SME digital transformation became a matter of infrastructure, skills, and policy - Trade Treasury Payments

Small businesses are no longer asking if they should go digital, they are asking how. 

According to a new white paper from the International Trade Centre (ITC), the digital transformation of small and medium-sized enterprises (SMEs) is now central to their competitiveness, their access to markets, and, in many cases, their survival.

Based on a survey of over 7,000 companies across 78 countries, the ITC’s White Paper on SME Digital Transformation offers a rare global snapshot of the structural enablers (and persistent gaps) that shape whether small businesses can succeed in the digital economy. 

This article unpacks a few of the report’s most striking findings and outlines the foundations of a digitally inclusive SME ecosystem.

The digital edge: Not all SMEs are benefitting equally

The promise of digitalisation is not abstract. Over 80% of companies surveyed said that digital technologies helped them reduce costs and boost sales, but the scale of these benefits differs dramatically depending on how intensively firms use digital tools.

SMEs that the ITC categorises as “expert users” were five times more likely than “emerging users” to report a sales increase of more than 50%. They were also twelve times more likely to report cost reductions of over 50%. These findings suggest that the more a business invests in digital maturity, the more it stands to gain.

Note: Respondents were asked, ‘Have digital technologies helped you cut the costs of your business?’ and ‘Have digital technologies helped you increase the sales of your business?’ `What benefits do you gain from using digital technologies?` Options include “Improve quality of products or services” and “More opportunities for innovation”. Companies are defined as expert, competent or emerging users of digital technologies if their digital transformation index is in the third, second or first tertile of the ITC Enterprise Digital Transformation Index distribution, respectively.

Source: ITC, based on ITC Digital Transformation Survey.

Further, three in four of the expert users said digital transformation helped them reimagine their business, enabling new products, better services, and access to foreign customers through e-commerce platforms. 

But that transformation is not occurring uniformly. Where a business is located, who leads it, and whether they have access to digital talent and capital all have a role in determining digital outcomes.

Infrastructure still sets the boundaries of access

A business can’t digitalise without access, and access (especially in low-income countries) is still deeply constrained by infrastructure.

In countries with strong digital infrastructure, 61% of surveyed firms were classified as expert users. In countries with weak infrastructure, that number drops to just 19%. This disparity cuts across income, geography, and gender. In low-readiness environments, large firms are two and a half times more likely to be expert users than small ones. Male-led firms outpace those led by women. Youth-led enterprises lag further still.

Note: Companies are defined as expert, competent or emerging users of digital technologies if their e-DTI is in the third, second or first tertile, respectively, of the index distribution. Countries are defined as having low (high) digital infrastructure if their NRI-Access index is placed in the first (third) tertile of the index distribution. 

Source: ITC, based on ITC Digital Transformation Survey and NRI from Portulans Institute.

The barriers take the form of both internet coverage and affordability. In some low-income countries, a fixed broadband subscription can cost nearly 30% of the average person’s income, far beyond the UN Broadband Commission’s 2% affordability target. While mobile broadband offers a more accessible alternative, even that remains prohibitively expensive in many regions.

Device access is another friction point. Only 14% of firms in low-income countries report using good-quality digital devices, compared with 73% in high- and upper-middle-income countries. Even when connectivity exists, outdated or low-capacity hardware prevents businesses from fully leveraging the tools required to scale or export.

And then there is data infrastructure. Sub-Saharan Africa has just 0.1 data centres per million people. In 2021, there were more data centres in California than in all of Sub-Saharan Africa combined. While this may not seem like cause for alarm on the surface, without domestic data processing capacity – and with legal restrictions on cross-border flows – many sub-Saharan firms are unable to adopt cloud-based services, AI tools, or even secure software updates.

The result is a geography of digital exclusion that mirrors existing development divides.

The skills trap: A missing link in digital readiness

Digital infrastructure may provide the wires and signals, but it is people who determine how, where, and whether technologies are used effectively. The ITC’s data reveal a strong correlation between national digital skill levels and firm-level transformation.

In countries with high digital skills capacity, nearly half of businesses were expert users. In countries with low digital skills, that figure drops to just 20%. The gap, once again, is managerial as well as technical. Among SME owners with post-secondary education, 71% had clear strategies for investing in digital tools. Among those with no formal education, that number was just 30%.

Note: Companies are defined as expert, competent or emerging users of digital technologies if their digital transformation index is in the third, second or first tertile of the ITC e-DTI distribution across countries, respectively. Countries are defined as having low (high) skill capacity if their NRI-Individuals index is placed in the first (third) tertile of the index distribution. 

Source: ITC, based on ITC Digital Transformation Survey and NRI from Portulans Institute.

There are a few aggravating factors for this split. First, national education systems often fail to deliver baseline digital literacy, let alone the advanced skills needed to work with AI or cybersecurity tools. Second, SMEs tend to offer fewer training opportunities to their employees, either due to limited resources or fears that upskilled staff will move on. Third, many SME managers remain unconvinced of the return on digital investment or are simply unaware of available tools.

This is certainly not a blanket assessment of the entire region. Some countries, like Nigeria and Thailand, are taking steps to help train their citizens for the digital world. Nigeria’s Three Million Tech Talent initiative (in partnership with Coursera) is helping expand digital marketing and cybersecurity skills. Thailand’s “Digital Village” programme has trained local entrepreneurs in e-commerce and helped SMEs access global buyers via Thaitrade. 

These examples, however, remain exceptions, not norms. Without further intervention across a wider proportion of the developing world, the digital skills gap risks becoming a drag on inclusive growth.

Regulation: Enabler or barrier?

Perhaps the most overlooked determinant of SME digitalisation is policy. The ITC whitepaper finds that in countries with supportive regulatory frameworks, 53% of firms are expert users, while in countries with weak digital governance, that number falls to just 18%.

Note: Companies are defined as expert, competent or emerging users of digital technologies if their digital transformation index is in the third, second or first tertile of the ITC Enterprise Digital Transformation Index distribution across countries, respectively. Countries are defined as having weak (strong) digital governance if their NRI-Regulation index is placed in the first (third) tertile of the index distribution.

Source: ITC, based on ITC Digital Transformation Survey and NRI from the Portulans Institute.

From e-signature standards to cross-border data rules, SMEs face disproportionate burdens in navigating legal requirements. In Bahrain, Ghana, Niger, and Vietnam, for example, 50% of ICT firms reported that regulatory issues made exporting difficult. Requirements that make sense for large multinationals (such as advanced cryptographic signatures or complex digital identity protocols) can be insurmountable for smaller firms with limited compliance capacity.

The lack of regulatory interoperability across borders adds to the problem. When payment systems, customs processes, or data privacy laws are not harmonised, small businesses face higher transaction costs, longer delays, and fewer incentives to enter foreign markets. In some cases, entire categories of digital solutions can be out of reach due to localisation mandates or ambiguous rules.

There is no shortage of guidance on how to fix this. From the WTO’s draft agreement on e-commerce to UNCITRAL’s model laws, templates exist to align digital regulations. It is the implementation that is lagging. 

Looking ahead: Closing the divide starts now

The message running through the ITC whitepaper is that digital transformation is not an automatic process, but one built through investment, education, and policy. Unless those building blocks are evenly distributed, however, digital transformation will become just another axis of inequality.

The ITC outlines three clear pillars for action:

1. Increase affordability: Invest in broadband expansion, lower device taxes, and promote competition in telecom markets.
2. Close the skills gap: Integrate digital literacy into schools, support private training schemes, and enable talent mobility.
3. Modernise regulation: Make rules interoperable, apply a risk-based approach to compliance, and include SMEs in policymaking.

The full white paper offers dozens of examples (spanning five continents) of how governments, firms, and international partners are already implementing these steps. It also presents an actionable framework for SME ministers and development actors looking to accelerate progress.

Whether digital transformation becomes a great equaliser or another source of divergence depends on what happens next.

To explore the data, case studies, and policy tools in detail, download the full ITC white paper here.