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Bridging the Credit Gap for Micro and Small Enterprises Through Digitally Enabled Financing Models

How can lenders provide credit to MSEs more effectively?
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Digital payment and operation systems present an enormous opportunity to improve the provision of credit to micro and small enterprises (MSEs) in emerging markets. Financial institutions, primarily fintechs and MFIs, are exploring the use of digital tools, such as merchant payments systems, online inventory ordering and e-invoicing, to improve the origination, assessment, delivery and collection of credit from MSEs. Whilst the total amount of lending being delivered by innovative lenders using digital tools remains small, their approaches have real potential to help fill the trillions of dollars of unmet credit demand from MSEs.

This report provides an overview of the demand for credit from MSEs, the digital tools that innovative lenders are using and the choices available to these lenders to more effectively provide credit to MSEs. It also outlines four business model taxonomies where digital approaches have the potential to drive a significant reduction in the credit gap that exists for lending to MSEs.


This work was funded in whole or in part by CGAP. Unlike CGAP's official publications, it has not been peer reviewed or edited by CGAP, and any conclusions or viewpoints expressed are those of the authors, and they may or may not reflect the views of CGAP staff.

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