Artificial Intelligence is reshaping industries across the world. For small and medium enterprises in South Asia, the question is no longer whether AI will matter but how it will transform the way these businesses operate.

SMEs in India and Sri Lanka stand at an important juncture. They face challenges of limited budgets, lean teams, and rising competition. Yet they also hold the potential to become more agile and competitive by adopting AI in ways that are practical, affordable, and aligned with local realities.

Why AI matters for SMEs

SMEs are the backbone of South Asia’s economies. India is home to more than 73 million micro, small and medium enterprises (MSMEs) that contribute nearly a third of its GDP. In Sri Lanka, an estimated 1.3 million MSMEs are active, representing more than 75 per cent of all businesses. They account for around 45 per cent of employment and contribute 52 per cent to GDP. These enterprises are the backbone of the economy, supporting employment, innovation, and regional development.

Despite this importance, SMEs in Sri Lanka and India often operate with structural bottlenecks in finance, operations, and market access. Many, particularly in Sri Lanka, function informally, which limits access to credit and technology. AI presents an opportunity to change this landscape by offering a set of adaptable tools that address these constraints directly.

The most important shift is accessibility. In the past, advanced technologies required heavy investments and were available only to large corporations. Today, cloud platforms, no-code applications, and software-as-a-service make AI affordable even for smaller firms.

The future of AI for SMEs will not rely on building expensive in-house systems. Instead, it will depend on adopting lightweight, cost-effective solutions that solve specific business problems.

Where AI will shape the future of SMEs

• Customer engagement and sales

In the coming years, AI-driven personalisation will be essential. A retailer in Colombo could recommend products based on past purchases, while a travel agency in Chennai could create tailored itineraries through an AI assistant. Vernacular AI will grow in importance, given South Asia’s vast linguistic diversity.

Systems that understand Sinhala, Tamil, Hindi, or Bengali will enable businesses to connect with customers more effectively. Predictive analytics will also help businesses forecast demand, reduce stock imbalances, and capture sales opportunities.

• Financial management and access to credit

Cash flow is one of the toughest challenges for SMEs. AI will help by predicting payment delays, assisting with working capital planning, and automating bookkeeping. Another important use is AI-driven credit scoring.

Many SMEs, particularly those in informal sectors, lack long credit histories. AI can help financial institutions evaluate them more accurately, enabling faster and fairer access to loans. In the future, SME owners will rely on real-time dashboards that replace guesswork with data-driven insights.

Also Read: Ecosystem Roundup: Asia’s climate-health crisis deepens as funding lags | SEA tech VC hits US$1.4B | Qapita raises US$26.5M Series B

• AI for fintech in the region

Fintech is emerging as one of the most powerful enablers of SME growth in South Asia. AI is at the core of this transformation.

AI-driven credit risk models allow lenders to extend financing to small businesses that were previously excluded due to lack of formal credit history. By analysing transaction data, utility payments, and digital footprints, AI expands access to working capital.

AI-powered fraud detection systems are also strengthening trust in digital payments. With the rapid rise of mobile wallets and online transactions in both India and Sri Lanka, SMEs can now adopt digital payment platforms with greater confidence.

Customer-facing AI chatbots in fintech apps are improving financial literacy by explaining loan terms, repayment schedules, and investment options in local languages. This democratises access to financial services and builds trust among first-time users.

For SMEs, the fusion of fintech and AI will reduce dependency on informal lenders, lower transaction risks, and provide the tools to integrate into formal financial ecosystems. Over time, this will boost both resilience and competitiveness.

• Operations and supply chains

Volatility in supply chains has become a constant reality. AI can support SMEs by anticipating disruptions, forecasting material needs, and identifying alternative suppliers. Route optimisation will lower logistics costs, while computer vision will improve quality control in production.

For Sri Lankan apparel exporters or Indian auto-component suppliers, these capabilities will be critical for maintaining competitiveness in international markets.

• Talent and workforce productivity

AI will not eliminate SME jobs but will reshape the way employees work. Routine tasks such as data entry, invoice processing, and report drafting will be automated. This will free employees to focus on relationship management, product design, and strategy. SMEs that invest in up-skilling will be better positioned to attract and retain talent. In the future, even small teams will achieve the efficiency of much larger organisations.

• Sustainability and ESG compliance

Sustainability is moving from optional to mandatory in global trade. AI will help SMEs track energy use, improve waste management, and generate automated sustainability reports. This will simplify compliance for export-oriented SMEs and open new opportunities with global buyers who demand responsible sourcing.

Challenges SMEs must overcome

The opportunities are significant, but the path forward is not without obstacles.

• The first challenge is data readiness. Most SMEs lack clean and structured data, which limits the effectiveness of AI tools. Data collection and standardisation will be the foundation of successful adoption.
• The second challenge is cultural resistance. Many business owners rely on instincts built over decades. Building trust in AI will require patience and small, visible successes.
• The third challenge is infrastructure. In rural areas, poor connectivity and unstable power supply make cloud-based AI tools difficult to use. Offline-first designs will be necessary.
• The fourth challenge is cost. Even as AI becomes more affordable, SMEs will hesitate unless the return on investment is clear. Flexible pricing models such as pay-per-use AI will be crucial.
• The fifth challenge is the skills gap. Many SME employees have little exposure to AI systems. Up-skilling programs delivered through industry associations, government initiatives, and training providers will be vital.

Also Read: AI for SMEs in Southeast Asia: From everyday experiments to emerging frontiers

The role of policy and ecosystem support

For SMEs to benefit fully, supportive policies and ecosystems are essential. India’s National AI Mission emphasises inclusion and SME-focused applications, while Sri Lanka has introduced programs promoting smart manufacturing. Both countries recognise that SMEs must be AI-ready to remain globally competitive.

In Sri Lanka, the SME sector has struggled in the context of recent economic challenges. Surviving amidst a financial crisis has made resilience a priority. Policymakers are now considering future directions that combine access to finance, digitalisation, and AI adoption to strengthen the sector.

Industry associations, chambers of commerce, and accelerators will also be critical. Their role is to demystify AI, offer training, and encourage pilot projects that allow SMEs to adopt AI at a manageable scale.

A practical path for SME leaders

For SME leaders in South Asia, the path forward is best taken step by step.

The first step is to identify a clear business problem. This could be customer service delays, cash flow challenges, or high defect rates in production.

The second step is to test affordable AI tools that address that specific issue. A chatbot, a predictive sales dashboard, or an automated invoicing system can provide immediate value.

The third step is to iterate and scale. If the pilot succeeds, resources can be directed toward expanding AI use. If it does not, lessons can be applied to the next experiment. Flexibility is the greatest advantage that SMEs hold over larger competitors.

Also Read: Balancing growth and security: How AI is transforming business and cyber threats

A vision for 2030

By 2030, AI will be deeply embedded in the daily operations of SMEs across South Asia. Local retailers will use voice assistants in regional languages to serve customers. Exporters will employ AI-powered quality checks to meet international standards. Farmers’ cooperatives will benefit from AI-driven climate forecasts to protect yields.

Professional firms will deliver services faster and more efficiently with AI copilots. Fintech platforms will integrate seamlessly with AI systems to offer SMEs tailored credit, secure payments, and real-time financial insights.

This transformation will not involve SMEs imitating large corporations. It will involve SMEs using AI to compete on their own terms, staying lean, responsive, and resilient.

Conclusion

The future of AI for SMEs in South Asia is not about dramatic overnight change. It is about small, focused applications that address everyday challenges. AI will steadily improve customer interactions, enhance financial access, lower costs, and unlock new avenues for growth.

For SMEs willing to experiment, the next decade presents extraordinary opportunities. The lesson is clear. Do not wait for the perfect solution. Start with one problem, adopt a practical tool, and learn from the experience. In this way, AI will become not just a trend but an everyday partner in the success of South Asia’s SMEs.

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Verta Bioenergy, a Singapore-headquartered climate-tech startup, has closed SGD 1.1 million (US$845,000) in seed funding from investors, including ENGIE Factory, Wright Partners, AlphaGen VC, and Auravia Capital.

Jun Umali from the Manila Angel Investors Network (MAIN) also participated.

The fresh capital will fuel the launch of Verta’s first commercial-scale manufacturing plant.

Also Read: EcoSfera helps turn your household waste into energy in the comfort of your home

Per a press statement, the funding injection arrives just one year after the company’s inception, during which Verta claims it has secured more than US$10 million in Letters of Intent (LOIs) with multinational corporations.

Co-created with ENGIE Factory, Wright Partners, and Ming Labs, Verta Bioenergy was incubated under the Singapore Economic Development Board’s (EDB) Corporate Venture Launchpad (CVL) programme.

The startup focuses on transforming agricultural waste into high-quality biomass pellets that are positioned as a cost-competitive, drop-in replacement for industrial coal usage.

With current operations established in the Philippines and plans for broader expansion across Southeast Asia, Verta Bioenergy is preparing to launch a commercial-scale manufacturing plant with an initial production capacity of 12,000 tonnes per year. The company is also developing a solar-powered dryer to enhance the overall sustainability of its process.

Verta’s leadership is bullish on its immediate financial outlook, expecting to achieve positive cash flow within the next 12 months.

Also Read: Turning trash into treasure: How Blue Planet tackles Southeast Asia’s waste crisis

Jeremy Tan, CEO of Verta Bioenergy, confirmed the strategic direction the funding will enable: “Our mission is clear: to replace coal with a cheaper, cleaner, drop-in alternative.” He added: “With the support of ENGIE Factory and our investors, we’re on track to achieve commercial-scale production and expect to generate positive cash flow within the next 12 months.”

 

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A noticeable step back yesterday after President Donald Trump floated the idea of halting trade in cooking oil with China. This comment stirred up new uncertainties in the already fragile ties between the two economic giants, reminding everyone how quickly trade disputes can escalate and ripple through markets. Investors reacted by pulling back from riskier assets, seeking shelter in safer havens.

At the same time, Federal Reserve Chair Jerome Powell offered some stability with his remarks. He noted that the economic picture looked much the same as it did during the September meeting, and he hinted strongly at another quarter-point cut in interest rates coming up later this month. These words from Powell helped temper some of the anxiety, as markets priced in the likelihood of easier monetary policy to support growth amid these tensions.

US stocks wrapped up Tuesday with mixed results, reflecting the push and pull between trade worries and Fed expectations. The Dow Jones Industrial Average climbed 0.44 per cent, showing resilience in some blue-chip names, while the S&P 500 slipped 0.16 per cent, and the Nasdaq dropped a steeper 0.76 per cent.

Tech-heavy indexes felt the brunt of the caution, as investors worried about how trade frictions might hit supply chains and corporate earnings. Bond markets told a similar story of caution. Treasury yields declined as people flocked to government debt for safety. The 10-year yield dropped three basis points to 4.02 per cent, and the two-year yield fell five basis points to 3.47 per cent. This movement underscores how quickly sentiment can shift toward defence when geopolitical headlines dominate.

The dollar weakened a bit in response, with the US Dollar Index down 0.22 per cent to 99.04. Gold, on the other hand, gained 0.4 per cent to reach 4126.47 dollars per ounce. This uptick in gold prices makes sense given the dual drivers of an anticipated Fed rate cut and the safe-haven appeal amid trade and geopolitical strains.

Oil markets faced their own pressures. Brent crude settled 1.47 per cent lower at 62.39 dollars per barrel, influenced by the International Energy Agency’s warning about a massive supply glut looming in 2026. That kind of forecast weighs heavily on energy prices, as it signals potential oversupply that could keep lids on any rebounds.

Also Read: From Tokyo to crypto: How political shifts and policy bets are reshaping global markets

Asian stocks mostly ended lower on Tuesday, mirroring the global unease, but they perked up in early trading today. Optimism around the possible Fed rate cut boosted moods, leading to gains that suggest some recovery in sentiment. US equity futures pointed to a higher open stateside, which could carry over if the positive vibes hold. From my perspective, this back-and-forth highlights the market’s sensitivity to policy signals right now.

Trump’s offhand remark about the cooking oil trade might seem niche, but it taps into broader fears of escalating tariffs or restrictions that could disrupt global supply chains. Powell’s steady hand provides a counterbalance, and I see the Fed’s path as a stabilising force, potentially cushioning against worse outcomes if trade talks sour further. The mixed stock closes remind us that not all sectors benefit equally from lower rates, especially tech, which relies on smooth international flows.

Looking to the cryptocurrency space, the market endured a 1.66 per cent drop over the last 24 hours, building on a 7.57 per cent slide over the week. This downturn stems from a combination of regulatory pressures and a major scam revelation, which together amplified the risk-off mood. Technical signals indicate oversold territory, suggesting a potential bounce if sentiment shifts; however, caution remains the order of the day.

Regulatory developments hit hard, with US authorities charging Chen Zhi, the chairman of Cambodia’s Prince Holding Group, in connection with laundering 14 billion dollars through crypto scams, as reported by Nikkei Asia. At the same time, Japan outlined plans to prohibit insider trading in crypto by 2026, also per Nikkei Asia. These moves rattled investors, reinforcing the view that digital assets carry significant oversight risks. Institutions grew wary, and retail traders sold off, fearing broader crackdowns.

In my humble perspective, these regulatory steps mark a maturing phase for crypto, where governments aim to curb abuses that have plagued the sector. The 14 billion dollar scam case stands out as a stark example of how fraud can undermine trust, and Japan’s insider trading ban signals a push toward mainstream financial standards.

While this might sting in the short term, it could build longer-term credibility if implemented thoughtfully. Investors should monitor the evolving details of Japan’s legal changes and any potential spillover from the seizure in the scam probe. Such events often lead to temporary sell-offs but can pave the way for more robust frameworks that attract serious capital.

Derivatives markets showed clear signs of stress, adding to the bearish tone. Total open interest in derivatives decreased 1.73 per cent to 989.73 billion dollars, and average funding rates plummeted 36.3 per cent in just 24 hours. Perpetual contracts volume rose 1.69 per cent to 697.74 trillion dollars, indicating frantic trading amid the panic.

This unwind of leverage came after Bitcoin dipped briefly below 105 thousand dollars, sparking 19 billion dollars in liquidations earlier in the week. The spot-to-perpetual ratio of 0.21 underscores how speculation dominated, making the market vulnerable to sharp corrections.

Also Read: Global markets freeze as Trump-Putin summit fails: What’s next?

I think this leverage purge reflects a healthy, if painful, reset. High funding rates often signal overextended positions, and their sharp drop shows traders rushing to exit as prices fall. The surge in perpetual volume points to knee-jerk reactions, where fear drives more activity rather than conviction.

In broader terms, this dynamic exposes crypto’s volatility, amplified by leveraged bets that can turn minor dips into cascades. From an optimistic angle, clearing out excess leverage might set the stage for more sustainable growth, reducing the risk of even larger blowups down the line.

Sentiment metrics captured the prevailing fear. The Crypto Fear and Greed Index slid to 37, squarely in fear territory, down from 42 the day before. This drop illustrates eroding confidence, as participants grapple with the regulatory and market pressures. Technically, the picture looked grim too.

The overall crypto market capitalisation stood at 3.84 trillion dollars, below the 50 per cent Fibonacci retracement level of 3.98 trillion dollars. The seven-day Relative Strength Index hit 28.38, indicating extreme oversold conditions, while the MACD histogram at negative 33.12 billion confirmed ongoing bearish momentum. Bitcoin’s dominance climbed to 58.59 per cent, suggesting a shift toward it as a relatively safe haven within the crypto ecosystem.

From where I stand, these technical breakdowns reveal how algorithms and momentum traders can exacerbate declines. Crossing below key Fibonacci levels often triggers automated selling, and the low RSI screams oversold, which historically precedes rebounds in other markets. But in crypto, with its unique mix of retail enthusiasm and institutional hedging, the MACD’s bearish read might prolong the pain.

The rise in Bitcoin dominance tells me investors are hunkering down in the biggest name, viewing it as less risky than altcoins during turmoil. Overall, this setup feels like a capitulation phase, where fear dominates but could flip if positive catalysts emerge, like clearer Fed actions or easing trade tensions.

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Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic.

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A report by AVPN and Prudence Foundation, in partnership with Catalyst Management Services (CMS), finds that as climate shocks intensify across Asia, traditional risk management and health surveillance systems are proving inadequate. Investors are now focusing on the convergence of digital innovation, climate data, and finance to create scalable safety nets.

This confluence manifests in two high-potential areas: AI-driven early warning systems and climate-linked parametric insurance models.

Also Read: Asia’s climate-health crisis deepens amid massive funding gaps

According to the ‘Unlocking Capital For Climate x Health: The Investment Landscape in Asia’ report, investors view climate-linked insurance as a “catalytic frontier”. Parametric models, which trigger automatic payouts based on pre-defined index thresholds (like rainfall, temperature, or disease incidence), eliminate lengthy claims processes, providing rapid financial relief to households and local authorities.

Applications of parametric models

These models have several practical applications that attract blended capital:

• Heat-index insurance: Providing rapid payouts for informal workers affected by extreme heat days.
• Vector-linked payouts: Offering immediate funds to public health providers when disease vectors (like mosquitoes) cross defined population thresholds.
• Bundled crop-health-risk covers: Protecting smallholder farmers against agricultural losses and subsequent health impacts following extreme weather.

Case study: WRMS SecuRisk platform

India’s Weather Risk Management Services (WRMS) and its SecuRisk platform provide a blueprint for this model.

• The technology: SecuRisk links climate data, collected via satellite and IoT, with parametric insurance to trigger automatic payouts instantly when climate thresholds (e.g., specific rainfall amounts or heat indices) are crossed.
• Impact and scale: This model reduces disaster-driven health losses and strengthens household resilience. It has successfully integrated with digital payment systems and Aadhaar, demonstrating scalability. WRMS has secured a significant grant of approximately US$2.268 million (€2.1 million) from the InsuResilience Solutions Fund and aims to expand its reach from 1,300 households to over 85,000 users.
• Investment potential: The global parametric insurance market is projected to surpass US$29 billion by 2031, signalling strong long-term commercial interest.

The role of AI surveillance

In parallel, AI surveillance and remote sensing tools are vital for adaptation, enabling governments to pilot early-warning systems for altered disease patterns. However, investors classify AI surveillance as a high-risk category (MVS 3.9-4.0) due to long development cycles, reliance on public data, and algorithmic bias and data privacy hurdles. Monetisation often depends on software as a service (SaaS) models licensed to health authorities, making government integration and policy buy-in essential for adoption. The success of these deeptech solutions hinges on integrating interdisciplinary capacity: technology, epidemiology, and policy expertise.

Also Read: Asia’s climate x health startups struggle in the ‘missing middle’ funding void

Ultimately, these investments turn climate risk into a measurable, insurable, and manageable metric, moving finance from reactive crisis response to proactive resilience building.

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For much of the past decade, venture capital in Southeast Asia was synonymous with hypergrowth: writing large cheques, chasing valuations, and celebrating fundraising milestones as the ultimate marker of success. In those years, capital alone often seemed like the fuel that could propel startups into market leadership.

But the environment has shifted. Fundraising is slower, scrutiny from LPs is sharper, and macroeconomic headwinds mean investors can no longer assume that money by itself will deliver scale. The conversation has moved from “how much was raised” to “how resilient is the business model.” Nowhere is this more evident than in B2B technology, where long sales cycles, enterprise compliance demands, and complex go-to-market strategies mean that maturity and operational discipline are prerequisites—not afterthoughts.

Where equity alone falls short

B2B startups don’t scale like consumer platforms. Long sales cycles, compliance hurdles, and enterprise buyer scepticism mean cash alone cannot guarantee traction. Founders in the region often bring vision and technical brilliance, but lack depth in:

• Financial governance to produce board-ready forecasts and disciplined cash controls.
• Enterprise sales execution to build structured pipelines and customer success models.
• Operational maturity to manage scale, risk, and compliance across multiple geographies.

When these disciplines are missing, portfolios suffer a “barbell effect”: a handful of companies thrive, while the rest stagnate.

Also Read: Navigating VC funding: The crucial role of a well-managed cap table

Why operational value creation matters

Across the industry, operating leverage is now the main driver of returns. Nearly half (47 per cent) of PE/VC value creation today comes from operational improvements, up from just 18 per cent in the 1980s. Firms that embed governance and discipline early are rewarded with stronger exits and faster follow-on rounds.

Examples from the region show this clearly:

• A Singapore cybersecurity startup closed a strong Series A after introducing structured board reporting and financial forecasting.
• A Malaysia-based SaaS company improved retention by adopting customer success practices.
• An Indonesian deep-tech firm unlocked strategic investment by professionalising operations with COO-level processes.

The common thread: once governance and scalability were evident, investors doubled down.

How VCs can differentiate

The most forward-leaning B2B VCs in Southeast Asia are already moving beyond capital by:

• Embedding operating partners and fractional C-suite talent to instil governance and GTM rigour.
• Providing structured frameworks that standardise reporting across portfolios, improving board communication.
• Incentivising operating support through performance-linked models that align outcomes with fund returns.

This is not simply nice-to-have. In markets where capital efficiency is scrutinised and enterprise buyers are risk-averse, these interventions are the difference between a portfolio company raising its Series B (or running out of runway).

Beyond capital lies capability

The days when capital alone could mask gaps in governance, sales discipline, or operational maturity are fading quickly. The pressure to demonstrate capital efficiency, credible growth, and resilience is now front and centre. For investors, the real differentiator lies in helping portfolio companies build the structures that endure beyond the next funding round.

In Southeast Asia’s B2B venture landscape, this evolution is already underway. The companies that will stand the test of time are not those that raise the largest rounds or capture headlines for sky-high valuations, but those that combine vision with capability. Beyond capital lies the true currency of value creation: the ability to build organisations that can grow, adapt, and thrive long after the initial cheque is written.

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Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic.

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