Bridging the Small Business Credit Gap Through Innovative Lending: How Data Flows, Tech Tools and Niche Marketing Can Bridge the MSME Financing Gap

Using digital platforms to connect borrowers with lenders or investors

This report by Accion Venture Lab describes the latest innovations in the field of micro, small, and medium enterprise (MSME) finance. It explores how innovative, tech-enabled lenders are using niche marketing, digital or mobile platforms, and enterprising partnerships – and often a combination of all three – to make financing available to underserved MSMEs. These new approaches leverage recent developments that have reduced some of the hurdles to viably lending to small business, specifically the emerging digitization of small business practices – such as government-mandated e-invoicing – as well as the growth of online finance and mobile money platforms.

Access to alternative data flows from these electronic sources and new analytic tools are smoothing the due diligence process and speeding loan approvals. By unbundling the suite of financial services usually found at banks and using niche and affinity marketing approaches, these pioneering lenders have unlocked new ways to identify, assess, serve, and support small business clients. Taken together, these trends present a new opening to close the large finance gap facing small businesses and many actors can play a role: investors, regulators, microfinance institutions, entrepreneurs and other startups.

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