LocationsCo-authored by: Pek Chuan Gan, Deputy Resident Representative, UNDP Maldives & Syed Husain Quadri, Director, Resilience and Climate Action Department, IsDB
The Business of Dreams: Small Ventures, Big Ambitions
May 7, 2025
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives
Mirco, small and medium-sized enterprises (MSMEs) account for approximately 94% of all registered businesses in the Maldives, making them the backbone of the economy. They play a critical role by fostering local employment, driving innovation, and supporting economic diversification. However, despite their immense potential, many MSMEs struggle to grow due to structural barriers, financial limitations, and logistical challenges. With around 85% of MSMEs relying on personal savings or informal loans - largely due to high collateral requirements - access to affordable financing remains one of the biggest hurdles they face.
Addressing these issues requires a holistic approach that combines strategic policy interventions, easier financial access, and robust business development support. A recent policy brief - ‘Strengthening the Entrepreneurship Ecosystem in the Maldives: Focus on Micro, Small, and Medium-Sized Enterprises’, produced in collaboration with Youth Co:Lab, co-led by UNDP and Citi Foundation, the Islamic Development Bank and the Commonwealth Secretariat – lays out concrete key initiatives for strengthening and revitalisingthis vital MSME ecosystem.
The Realities of the Start-Up World
Across the Maldives, entrepreneurs work tirelessly to build businesses that sustain livelihoods and contribute to their communities. Roughly40,232 small operate nationwide, and nearly 85% are own-account workers (i.e. self-employed), limiting their ability to access government incentives and business support services.
Take for consideration, a home-based food business, producing traditional short eats, it normally enjoys high demand from the neighbourhood communities. However, scaling up remains challenging due to rising costs of rent and materials, along with limited access to affordable loans and other sources of financing. Transitioning into a formalized enterprise is difficult without proper financing and business support services.
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives
Similarly, efforts to establish an e-commerce platform to support local artisans and small retailers highlight another set of challenges. While such a platform has the potential to expand market access and boost digital trade for artists, musicians, and craftspeople alike, obstacles like limited startup capital, high logistical difficulties, and uncertain digital-trade regulations hamper growth.
Although platforms like Authentic Maldives, Moolee, iBay and Etukuri have emerged to facilitate digital trade, e-commerce adoption remains slow due to high internet costs and limited digital financial services. Despite 63.2% of the population having internet access, digital transactions remain costly and underutilized. The lack of clear policies supporting digital enterprises adds further uncertainty for entrepreneurs venturing into the online marketplace.
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives
In the tourism sector, the rise of guesthouses on local islands presents economic diversification opportunities for local communities. However, logistical expenses, inadequate banking facilities, and limited digital infrastructure again restrict growth and access to international markets.
Although tourist arrivals rebounded by 138 % after COVID19, many small businesses could not fully capitalize on the surge because of financing gaps and regulatory red tape. Unlocking the promise of genuine communityled tourism will require streamlined rules and significantly better physical and digital connectivity.
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives
What’s Holding MSMEs Back (And How to Fix It!)
Many entrepreneurs struggle to secure funding due to high collateral requirements, low financial literacy, and limited financing options. The demand for affordable credit far exceeds supply, leaving many MSMEs reliant on personal savings or informal loans. On average, MSMEs generate only MVR 6,480 per month in profit, highlighting the financial constraints they face in sustaining and expanding their businesses. The SME Development Finance Corporation (SDFC) provides targeted financial services, but its accessibility outside Male' remains limited. Alternative financial models, such as crowdfunding and venture capital, are also underdeveloped in the Maldives, leaving many businesses with few viable funding options.
Furthermore, the dispersed geography of the Maldives creates costly and inefficient supply chains. High transportation costs, unreliable shipping schedules, and a lack of comprehensive banking services in remote islands restrict the ability of small businesses to scale effectively. Many MSMEs also operate informally, hindering their access to government incentives, business mentorship, or networking opportunities.
Additionally, while the SME Act 2013 provides an overall policy framework for creating an enabling financial and regulatory environment for MSMEs, many entrepreneurs report that compliance with tax and licensing requirements is burdensome, discouraging formalization.
Business owners frequently grapple with legal compliance, digital literacy, and financial management barriers that could be alleviated with improved support services. For startups in emerging sectors such as information, communication, and technology, ambiguous regulations present an additional challenge.
In addition, it is critical to note that Women own 52% of MSMEs in the Maldives, yet 61% of women entrepreneurs operate in manufacturing, which is predominantly informal. Similarly, youth entrepreneurs account for 28% of MSME ownership but often lack structured mentorship opportunities, making it harder for them to scale their ventures. Women and young entrepreneurs encounter additional challenges, ranging from societal expectations to limited access to funding and training. Although women play a pivotal role in small-scale businesses, they often find it difficult to scale due to a lack of financial inclusion and business mentorship.
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives
Small but Mighty: Supercharging the MSME Ecosystem
In lieu of this, it is apparent that a stronger MSME ecosystem in the Maldives necessitates expanding financial support through the introduction of low-interest micro-loans, alternative financing mechanisms such as crowdfunding, and enhanced financial literacy programmes. Numerous small businesses struggle due to limited access to capital, making it vital to create targeted funding initiatives that address their specific requirements. Therefore, going forward he following 5 key points of action could be taken into consideration:
Reducing collateral demands and simplifying loan application processes can enable more entrepreneurs to access essential financial resources, fostering business growth and sustainability.
Strengthening business support services is also essential. MSMEs would significantly benefit from structured training programmes, advisory services, and mentorship opportunities that equip them with the skills needed to navigate regulatory frameworks, enhance financial management, and adapt to market changes. Establishing more business incubators and accelerators can provide tailored support, creating an environment where startups can flourish.
Improving infrastructure and digital connectivity is another critical step in ensuring the success of MSMEs. Expanding inter-island transport networks and investing in more efficient logistics solutions will reduce operational costs and improve access to broader markets. Strengthening digital infrastructure by enhancing internet access, broadening digital payment systems, and promoting large-scale e-commerce adoption will enable businesses to compete in an increasingly digital economy.
Streamlining regulatory processes will also facilitate easier operations and growth for MSMEs. Simplified business registration, tax compliance procedures, and licensing processes help alleviate administrative burdens, allowing small businesses to concentrate on innovation and expansion rather than bureaucratic obstacles. More explicit policies for emerging sectors like digital enterprises will further encourage entrepreneurship.
Promoting inclusive entrepreneurship is crucial to ensuring that women and youth have equal business opportunities. Dedicated funding programmes, mentorship initiatives, and policies that support work-life balance, such as childcare support, can help bridge existing gaps in gender disparity and improve access to entrepreneurship. This is particularly important given that women own 52% of MSMEs (many in informal sectors) and youth account for 28%, often lacking the mentorship needed to scale effectively..
Encouraging greater participation from these groups will not only foster more resilient businesses but also contribute to overall economic growth and social development. By nurturing a supportive entrepreneurial ecosystem, the Maldives can unlock the full potential of its MSME sector, ensuring sustainable development and long-term prosperity.
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives
Powering Up for What’s Next
As is clear by now, for small businesses to thrive, the Maldives must foster an ecosystem that encourages innovation, investment, and inclusivity. Despite their vital role in the economy, MSMEs continue to face significant challenges in accessing finance, navigating regulatory processes, and leveraging digital opportunities.
Addressing financial barriers, enhancing infrastructure, and streamlining regulations will unlock the true potential of the MSME sector, ensuring long-term economic sustainability and shared prosperity.
By implementing these strategic measures, the Maldives can transform its MSME ecosystem into a dynamic, inclusive, and sustainable engine of economic growth and communal prosperity.
A collaborative effort between the government, financial institutions, the private sector, and development partners is essential to remove existing barriers and empower small businesses to thrive. The time to act is now – ensuring that small ventures with big ambitions receive the support they need to succeed.
The Business of Dreams: Small Ventures, Big Ambitions
UNDP Maldives