Digital Innovation as a Real Enabler for SME Finance: Building an Effective, Unified and Accessible Financial Ecosystem for MSMEs

Multi-sectoral insights and best practices on digitalisation, risk assessment, data security and credit culture-building to empower the ‘Unbanked’

Micro, Small, and Medium-sized Enterprises (MSMEs) play a vital role in Southeast Asia’s economy. MSMEs comprise 98% of the region’s enterprises. In Indonesia, MSMEs contribute over 50% to the country’s GDP. With an estimated 64 million in operations, they are regarded as the backbone of the country’s economy.

But financing support and options to allow MSMEs to further flourish are limited. New entrepreneurs have limited knowledge and access to loans, while established financial institutions are at a loss of how to assess MSME’s creditworthiness.

Lack of access to finance is a critical barrier to growth for SMEs globally. Among the reasons is the higher cost to serve SMEs; information asymmetries, or the absence of traditional data used by banks to assess creditworthiness; lack of collateral; and onerous documentation requirements.

A cycle of challenges therefore arises how to make financial products and services more accessible to wider segments of a population, particularly the ‘unbanked’ and ‘underbanked.’

Leveraging technology to advance the country’s underserved, the ‘unbankable’, be bankable

Digitalisation offers exciting prospects and solutions to bridge the gap between institutions and MSMEs. It provides cost-effective, timely, and efficient platforms that can innovate how credit ratings work.

The Covid-19 pandemic has demonstrated that digitalisation is key for small and medium-sized enterprises (SMEs) to continue being able to deliver good customer experience and has accelerated the momentum of digital adoption.

Recent advances in digital technologies and innovative business models represent a game-changer that can help close the SME finance gap by enabling smaller firms to tap alternative sources of funding, thanks to the data generated by their digital footprint.

The digital transformation of SMEs can reduce their operational costs and increase their productivity, which in turn can lead to more transparency and better access to finance. Digitalisation also enables the introduction of new products and services, and wider incorporation of SMEs into the formal economy leading to further financing opportunities.

The increasing access to markets and new business models offered to SMEs by e-commerce and the sharing economy, together with data-driven business opportunities derived from data sharing in open banking frameworks, represent key enablers for digitalisation.

A foundational component for the use of digital financial products and the digitalisation of SMEs is having reliable access to affordable mobile phone and Internet connectivity.

Using China as an example, digital banking has paved the way for MSMEs and private consumers to obtain alternative credit portfolios. This has given their financial institutions the chance to offer varied products and get access to wider market segments.

Their success can be attributed to an effective, unified, and accessible financial ecosystem that empowers any interested players to avail of financial products and services. They were able to increase operational efficiency in terms of disbursement and repayment as well as reach previously untapped consumers.

Is it possible to replicate the same success in Indonesia?

The answer is, in fact, a resounding ‘yes.’

OpenGov Asia is pleased to invite you to this exclusive and highly timely OpenGovLive! Virtual Breakfast Insight aimed at imparting knowledge on strategies on how to maximise digital technologies to ensure financial inclusion and create a unified ecosystem for MSMEs.

This session would serve as a great peer-to-peer learning platform to gain insights and engage and discuss relevant digitalisation trends, digital solutions, and digital adoption know-hows.

We will be discussing strategies on:

● Improving access to unsecured, non-collateral banks’ financing for SMEs across the country

● Maximising SME Banks’ outreach to underserved segments through improved distribution digitally

● Identifying key products and services for a post-COVID-19 environment

● Competitive strategies to meet SMEs’ combined needs for financial & non-financial products & services

● Leveraging digital technologies to help SMEs during these unprecedented times.

● Forging strategic partnerships between the government and the private sector for data transparency

● Minimising the risks associated with the digitalisation of SMEs, particularly by ensuring data protection and privacy rights, and adequately managing cybersecurity risks

● Addressing the challenges and risks of the digitalisation of SMEs and that can promote a more conducive environment for facilitating SME access to finance through digital technologies

Who should attend:

• Heads of SME Finance

• Chief of Digital Credit

• Heads of Digital Finance & Microfinance

• Heads of MSME / Business Strategies

• Heads of Unsecured Lending

• Heads of Digital Transformation