Funding and MSMEs: Can banks & Fintech together address the credit gap for small businesses?

SMEs are generally key contributors to a country’s economy; however there is one big common problem among these types of business. The lending gap is one of the main factors and obstacles that impede the growth of this sector. In fact, the International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal MSMEs in developing countries, have an unmet financing need of UDS 5,200 billion every year, which is equivalent to 1.4 times the current level of the global MSME lending.

Nevertheless, thanks to new technologies, NBFCs powered by Fintech are paving a hassle-free route to efficient and customized credit products for MSMEs.

Lending gap can be reduced thanks to the use of Fintechs; however, both Fintechs and banks can collaborate to empower small businesses in the post-pandemic new world. Likewise, adoption of innovative lending models will not only forge the right balance for financial stability but also encourage a focus on the credit needs of small businesses.