New approaches to MSME lending challenging traditional credit assessment models in electron
By: DeLuca, Thomas J
Material type:
ArticlePublisher: 2014Description: 226 - 235Subject(s): Banking | Payments | Microfinance | Lending | Smes | Msmes | Micro, Small And Medium-Sized Enterprise
In:
Enterprise Development and MicrofinanceSummary: Micro, small, and medium-sized enterprises (MSMEs) play a critical role in economic growth and wage employment in both developed and developing economies, yet significant obstacles remain in unlocking the potential of these businesses - especially as regards access to credit. A confluence of three new market trends is reshaping longstanding efforts to overcome this dilemma: 1) increasing access to real-time, 'electronically verifiable' cash-flows; 2) the mining of cash-flow data to reveal insights into repayment likelihood beyond that discoverable in traditional credit analysis; and 3) the adoption of financial technology and certain principles of microfinance lending - most specifically uncollateralized lending and frequent incremental repayment - to meet the funding needs of MSMEs. This paper explores the interrelationship of these trends and contends that, together, they enable suitably empowered financial institutions to originate and manage short-term, unsecured loans to formal MSMEs on a profitable and scalable basis.
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Ahmedabad (HO) | (Browse shelf) | Vol. 25, Issue. 3 | Available | 018709 |
Micro, small, and medium-sized enterprises (MSMEs) play a critical role in economic growth and wage employment in both developed and developing economies, yet significant obstacles remain in unlocking the potential of these businesses - especially as regards access to credit. A confluence of three new market trends is reshaping longstanding efforts to overcome this dilemma: 1) increasing access to real-time, 'electronically verifiable' cash-flows; 2) the mining of cash-flow data to reveal insights into repayment likelihood beyond that discoverable in traditional credit analysis; and 3) the adoption of financial technology and certain principles of microfinance lending - most specifically uncollateralized lending and frequent incremental repayment - to meet the funding needs of MSMEs. This paper explores the interrelationship of these trends and contends that, together, they enable suitably empowered financial institutions to originate and manage short-term, unsecured loans to formal MSMEs on a profitable and scalable basis.
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