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Accelerating Trade Digitalization to Support MSME Financing

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For many micro, small and medium-sized enterprises (MSMEs) around the world today, access to financing can mean the difference between prosperity and bankruptcy. Working to identify, understand, and ultimately overcome the challenges that MSMEs face in their quest for acquiring financing will help to ensure that the next great technological idea does not cease to exist before it has a chance to change the world. This publication seeks to identify some of the most pressing of these challenges, understand them, and explore the potential application of digital technologies to mitigating their impact. To that end, the authors conducted interviews and surveys with experts in the field of MSME financing, including, in some cases, trade financing, to shed light on these issues and explore the ways in which technology can be used. This publication begins by examining some of the challenges that have been identified as impacting MSME financing, as well as the role that the COVID-19 pandemic has had in moulding the landscape. Next, it moves on to examining key digital technologies, their potential benefit to the industry – in particular to MSME financing – a selection of case studies and of companies utilizing these technologies, the adoption challenges they face, and recommendations for overcoming these challenges. The technologies in question include cloud computing, optical character recognition, the Internet of Things, big data analytics, artificial intelligence, quantum computing, distributed ledger technology and application programming interfaces.

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Conclusion

The key issue for MSME financing is risk assessment, and more specifically, how to better assess the risk potential of companies that lack a long credit history. Technological tools and data-driven solutions enable firms to approach this process from a new angle. They make it possible to harness a bigger pool of data to provide greater visibility into firms’ operations and creditworthiness. Rather than a backward-looking approach to risk assessment, as in the past, data can now allow financiers to make risk assessments a real-time process.

English

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