Jane told Marcos that in spite of (him/his) being small, he would definitely be a great asset to the team because of his athletic abilities.
In the above sentence, which of him/his is correct and why ?
Both are grammatical, but each has a slightly different emphasis. The personal pronoun (him) foregrounds the fact that it was he, rather than anyone else, who was small. The possessive determiner (his) foregrounds the state of being small.
Either would be accepted in most casual speech, but "his" is more formally correct. "Being small" is a property he has, so is most properly attributed to him using a possessive.
The form using "him" is somewhat broken because it's using an objective pronoun in a subject-like capacity.