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The SME Access to Digital Finance Study: A Deep Dive into the Latin American Fintech Ecosystem

Feb 02, 2025
Tania Ziegler (CCAF), Felipe Ferri de Camargo Paes (CCAF), Cecilia López Closs (CCAF), Erika Soki (CCAF), Diego Herrera (IDB), Jaime Sarmiento (IDB)
 
This edition of ‘The SME Access to Finance: A Deep Dive into LATAM’s Fintech Ecosystem’ provides insights into micro, small and medium enterprises’ (MSMEs’) access to funding through the alternative finance industry in Latin America (LATAM). The study looks at key factors influencing MSMEs’ access to finance, such as business owner demographics and company structure, relationships with traditional finance, previous and current funding experiences with a financial technology (fintech) firm, and post-funding outcome.
 
Highlights from the report
  • The results from the study reveal that most respondents (75%) were micro enterprises, supporting the hypothesis that fintechs are a critical component of smaller businesses’ funding cycles. Of the respondent MSMEs, 44% were mature firms that had been operating for more than six years and less than one-third were young firms that had been operating for fewer than three years. Most of the CEOs were men, and one-third had an undergraduate degree and were aged between 35 and 44.
  • In terms of the amounts borrowed or raised, the findings suggest that they were concentrated around lower values. Overall, the median amount borrowed or raised was USD3,917 and for 75% of the sample (up to the third quartile), the amounts ranged up to USD20,000. Most MSMEs used the money, with a median value of USD4,023, for working capital. This value was largely influenced by MSMEs that had borrowed from a P2P/marketplace lending platform. By industry, MSMEs operating in traditional industries raised the highest funding amounts, with a median borrowing value of USD8,813. This was followed by MSMEs in the innovative, and commerce and services industries, where the median amount borrowed for both sectors was approximately USD4,000.
  • Before receiving funding from a fintech platform, MSMEs had tried to raise funds through different sources, primarily banks or family and friends. Banks were the most popular funding source for those that used P2P/marketplace or invoice trading platforms, while for those MSMEs that used investment crowdfunding or non-investment crowdfunding platforms, it was friends and family. Although many MSMEs sought funding from banks, only approximately one-half received an offer and accepted it. MSMEs that sought funding from family and friends were more successful, especially those that used an investment crowdfunding platform: more than 80% received an offer, all of which were accepted.
  • Regarding traditional finance facilities, the type of product used differed by vertical. MSMEs that used P2P/marketplace lending or non-investment crowdfunding platforms relied more on personal financial products, in the form of personal credit cards or personal accounts, to support their business. Conversely, most MSMEs that used invoice trading or investment crowdfunding platforms used business accounts. Friends and family were the traditional facilities that more than half the MSMEs that raised funds through an investment crowdfunding fintech turned to.
  • The decision to raise funds through an alternative finance platform was largely influenced by being able to receive funds faster and better customer service. Also, MSMEs that used a P2P/marketplace lending platform reported they were unable to get funding through any other source except a fintech, indicating this was one of the most important decision making factors. A better interest rate was another very important decision-making factor, being reported by approximately half the MSMEs.
  • Overall, MSMEs managed to improve their businesses’ financial health as a result of the funding received via an alternative finance platform. Most MSMEs across all business models and platform types increased turnover and net income. However, 20% of those that used an investment crowdfunding platform saw a decrease in net profit, but those MSMEs also reported a significant increase in the business’s value and employment rate (over 60% for both factors).
  • Overall, the main impact on the businesses due to funding was an increase in productivity, which was mainly seen for those that used an investment crowdfunding platform (67%). One-third of MSMEs that used a digital lending or invoice trading platform decreased costs. Further, launching a product or service was the result for more than 6 0% of MSMEs that used an investment or non-investment crowdfunding platform.
  • Another outcome of receiving funding was a positive change in the use of different financial products. There was a noted increase in the use of savings or checking accounts for entrepreneurs that borrowed from a digital lending or invoice trading platform. MSMEs either decreased their use of or stopped using products such as overdrafts, loan contracts or revolving lines of credit. Interestingly, most MSMEs that used an investment crowdfunding fintech reported no change. However, there were a few for which the use of loan contracts and mortgages increased, and decreased for business credit cards and invoice trading products.
  • Regarding the COVID-19 pandemic’s effects on the business, almost half the businesses managed to cope with the crisis and remained operational, albeit with adjustments. Approximately one-third of MSMEs had to shut down operations temporarily and only 3% had to permanently close their business. When asked about government-based assistance, 22% reported receiving it, of which half received a government COVID-19 voucher and emergency funds for payrolls.
  • The main assistance offered by fintech platforms was related to payment facilities. For digital lending, invoice trading and investment crowdfunding platforms, the primary types of assistance provided were payment holidays and eased payment plans. For non-investment crowdfunding platforms, it was waiving fees. Completing the top three assistance types offered, across all models, were credit facilities (not related to a government assistance scheme).
 
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Cambridge Centre for Alternative Finance (CCAF) is an Affiliate of the SME Finance Forum

 

https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publicat…
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2023 Latam SME Fintech report

Apr 15, 2024
Summary:
 
- Regional focus: the report foretells a surge in interest from fintechs towards SMEs in Latin America by 2024. 
 
- Innovation opportunities: it highlights the potential for innovation within the industry and identifies key areas where solutions can reshape the fintech landscape to better serve SMEs.
 
- Targeted countries: discover which countries in Latin America are at the forefront of developing tailored solutions for SMEs.
 
- VC investment: fintechs focusing on the SMEs market will be better positioned to raise funding.
 
 
This report was produced by KoreFusion, provider of strategy consulting and M&A advisory services exclusively for the international fintech, payments and financial services industries.

 

https://www.korefusion.com/insights/2023-latam-sme-focused-fintechs
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Leader Dialogue Series - Interview with Irene Arias, CEO of IDB Lab

Feb 10, 2021
Learn from Irene Arias, CEO of IDB Lab, (former FOMIN), about the importance of innovation labs, and how they accelerate digitization for SMEs in Latina America and the Caribbean, as well as provide other solutions, especially to cope with the COVID-19 pandemic.
 
The SME Finance Forum’s Fireside Chat, now "Leader Dialogues", is a new series of one-on-one interviews with CEOs, senior executives of financial institutions and technology companies as well as financial sector regulators.
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Member News: We welcome Banco Atlántida to promote development and growth of SMEs

Oct 01, 2020
Washington D.C., October 1st, 2020- Banco Atlántida joins the SME Finance Forum as the newest member of our global membership network. Our members are SME Financing experts from 80+ countries who share the common goal of expanding access to finance to small businesses worldwide, through knowledge exchange and innovation. 
 
“40 percent of small and medium businesses worldwide struggle to get access to the credit and capital that they need to grow their enterprises. We are delighted to welcome Banco Atlántida to our network of 200 members who are working to eliminate the finance gap for SMEs,” said Matthew Gamser, CEO of the SME Finance Forum. 
 
To see all SME Finance Forum members, please visit: https://www.smefinanceforum.org/members/member-list
 
Banco Atlántida serves individual consumers, SMEs, and large corporations through a variety of financial products and services and a robust multi-channel electronic banking platform. Currently, their network includes 188 branches, 22 drive-through locations, and more than 900 non-banking correspondents, who have a presence in all 18 departments of the Honduran territory. 
 
“Our goal is to accompany our clients in their growth process. As a leading financial institution, we believe the SME Finance Forum can help us uphold this quality of service and support to our clients, through continuous innovation and knowledge of best industry practices around the world,” said Guillermo Bueso Anduray, CEO of Banco Atlántida.  
 
About SME Finance Forum 
The SME Finance Forum was established by the G20 Global Partnership for Financial Inclusion (GPFI) in 2012 as a knowledge center for data, research, and best practice in promoting SME finance. As an implementing partner for the GPFI, the International Finance Corporation (IFC) was tasked with managing the initiative.
 
About Banco Atlántida
Banco Atlántida, founded in Honduras in 1913, has consolidated itself as a leading banking institution, serving retail, SMEs, and corporate banking segments with integrity, quality, and innovation. It offers the largest branch network in the country and a multichannel electronic banking platform through cash management, credit, international, and business banking products. 
 
Media Contact  
Carina Carrasco  
 
 
 

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Seu Ativo

Seu Ativo, founded by seasoned professionals with expertise in investments, payments, and technology, aims to develop Brazil's invoice financing market amidst regulatory transformation by the Brazilian Central Bank. Focused on MSMEs and e-invoice issuers, Seu Ativo offers a fully digital process ensuring legitimacy and unicity for e-invoices and receivables. In association w/an Payment Institution, Seu Ativo have created a unique settlement process to ensure payments reach the true owner of the receivable.

Country / Region
Brazil
Member Since
Organization Type
Fintech
Profile Link
Find out more
Contact Person Name
Horst Muller
Contact Person Title
CCO
Contact Person Email
muller@seuativo.com.br
Operation countries
Latin America and Caribbean

ADAPTA

ADAPTA is a US-based technology company operating in East Africa, Latin America, and soon Asia. It offers an AI-driven, cloud-based risk management software solution that equips financial intermediaries with the necessary data and insights to assess and mitigate climate, soil, water, and biodiversity risks in agricultural loans and investments. Through its innovative technology, ADAPTA has received support from the Climate Catalytic Finance Facility to launch the Climate Finance Facility—a unique bank of banks providing technology, blended finance, and capacity-building to scale nature-based agricultural practices globally.

Country / Region
USA
Member Since
Organization Type
Fintech
Profile Link
Find out more
Contact Person Name
German Vegarra
Contact Person Title
CEO & Founder
Contact Person Email
german@adapta.earth
Operation countries
Africa
Latin America and Caribbean
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