Financial Inclusion | SME Finance Forum

24 Apr, 2024

Inaugural Information Session Global SME Finance Awards 2024

BE RECOGNIZED, SHARE IMPACT IN SME FINANCE The SME Finance Forum organizes the Global SME Finance Awards ( The Awards) as a core part of its mission to create a unique platform for peer connections, knowledge dissemination, and innovations in SME...

14 May, 2024

Cracow, Poland

MFC Annual Conference: Embracing Diversity for Inclusive Finance

Financial Inclusion

Join the upcoming MFC 26th Annual Conference: Embracing Diversity for Inclusive Finance. Register now at https://2024mfc.org/ and take advantage of exclusive rates. Dates: May 14-15, 2024 Location: Cracow, Poland The MFC conference will showcase good...

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How Universal Trusted Credentials (UTC) can transform financial inclusion

Apr 15, 2024

In November 2023, the United Nations Development Programme (UNDP) moderated the closed-door roundtable "How Universal Trusted Credentials (UTC) can transform financial inclusion". This event brought together senior representatives from central banks, financial institutions, and other stakeholders from around the world to discuss the opportunities and key insights of how the UTC initiative can support underserved enterprises in accessing financial services globally.

Introduction

While they represent the building blocks of every country’s economy, micro, small and medium-sized enterprises (MSMEs) still face structural gaps in accessing affordable finance needed to build their businesses and capitalise on new opportunities. While the specifics may differ from businesses to businesses, there are a few main barriers that have been identified. These barriers are the lack of collateral, the lack of auditable performance track record, unverified data, and financial literacy gaps. This problem is also worsened by MSME’s informality and fragmented regional and global approaches that continue to reinforce existing financial exclusion. MSMEs confront an alarming annual financing gap of US$5.2 trillion content 1, with those operating in the informal sector particularly susceptible. These informal enterprises, which play a pivotal role in job creation (constituting between 80 and 90 percent of the workforce in low- and middle-income countries), face compounded difficulties due to their informal status.

The Universal Trusted Credentials (UTC) is a global framework of indicators designed to derisk the underwriting of financial institutions for micro, small and medium-sized enterprises, including informal ones, and make it easier for them to access national and regional financing pools. The data points used with the UTCs are exclusively sourced from authoritative data sources and selected based on their relevance and utility to financial institutions for evaluating an enterprise’s intent and ability to pay. The framework facilitates more efficient, cost-effective, and higher levels of financing and financial services, particularly benefiting MSMEs that often face restricted access to financing or heightened collateral requirements due to lack of verified data. The UTC is essentially a trust mechanism between MSMEs and lenders: by leveraging a digitally-enabled, immutable and interoperable creditworthiness profile of an MSME (which is owned by the MSME itself), the UTC derisks borrowing from financial institutions (FIs).

Throughout the roundtable, the diverse group of participants investigated the opportunities and pathways through which the UTC framework can be operationalised. Three key insights have emerged from the roundtable.

Key Insights

#1 Complementing traditional data with alternative data creates a more comprehensive creditworthiness profile, with digitalisation further reinforcing the level of trust from financial institutions

To date, when MSMEs apply for a loan with a FI, their creditworthiness is determined via 'traditional ways’ – such as using in-house data and lending history. However, MSMEs often have no such pre-existing data to showcase, or the data that they possess has not been robustly verified. In contrast, the proposed UTC framework considers additional alternative data points which can demonstrates a business’ ability and trustworthiness in meeting the contractual obligations of its loans. For example, data points on the consistent fulfilment of supply contracts or the active and timely repayment of utility bills demonstrate an MSME’s ‘intent to pay’, and data points on verified trade volumes on e-commerce platforms together with mobile money and digital payments contribute to the ‘ability to pay’ profile.

When combined, the traditional and alternative data sets construct a more complete picture of the creditworthiness of an MSME, which helps to facilitate the financial inclusion of previously underserved businesses, especially informal ones. Additionally, leveraging digitalisation for the verification and credentialing mechanism further reinforces the trust with FIs and derisks their operations, both domestically and at a transnational level, as noted by one of the participants.

#2 The business case for financial inclusion: Reduced costs for financial institutions and enhanced data privacy

Not only is there an impact case for the UTC – that is, promoting financial inclusion for MSMEs, enabling their formalisation, increasing their access to business opportunities (domestically and cross-border) and more generally empowering underserved communities and employees. There is also a complementing business case to be made for it, as remarked by the speakers. Currently, it is costly and time-intensive for banks to perform Know Your Business (KYB) and due diligence (DD) activities prior to making a decision on whether to extend loans or other financial resources to MSMEs. Such innate costs often negatively impact the decision itself. While the data that is required might exist, it is neither accessible by or shared with other parties. This raises a fair question: What if FinTechs, local tax authorities and credit bureaus come together and collaborate to reduce the cost of doing KYB and DD, and to enhance data usage, all while ensuring data privacy and security? This is a solution that the UTC framework enables. For example, if a Tax Identification Number is the data indicator required, then the data point that has to be delivered would be digitally verified by the local tax authority itself via a UTC Platform. This mechanism, currently being tested with the UTC initiative, opens up the possibility for further cost reduction and enhanced data usage.

#3 Appropriate governance mechanisms and whole-of-ecosystem collaboration are key for success and scalability

Throughout the roundtable, participants stated how collaboration between actors will be crucial to achieve success and scalability of the UTC initiative. Continued private-public collaboration is indeed instrumental to effectively launch and scale new initiatives such as the UTC. This involves not only securing the support of regulators to establish trusted frameworks that convey the same level of trust and quality of the data across countries, but also engaging with development institutions, FIs, FinTech operators, and MSMEs associations. Fostering local ecosystems and testing implementation use cases via pilots in selected countries is crucial for learning what works and what are areas for improvement. All of this serves to further inform the operationalisation of the UTC in a way that benefits financially excluded MSMEs, and is also interoperable—thereby expanding access to finance and creating cross-border trade opportunities for them. Moreover, in order to facilitate the adoption of the UTC framework globally while also keeping in mind local specificities, an appropriate tiered governance structure will need to be designed within the UTC initiative. The continuous refinement of the UTC framework via the ecosystem engagement, pilots, and establishment of governance structures will enable it to rapidly scale and be implemented in additional countries, further expanding the number of MSMEs positively impacted by the initiative. This expansion will be instrumental in bringing aboard more MSMEs into the formal financial system, demonstrating the transformative power of the UTC for empowering financial inclusion and economic growth.

About the UTC initiative

The United Nations Development Programme (UNDP) and the Monetary Authority of Singapore (MAS) are working together on the UTC project. We jointly launched a White Paper on the UTC at the Singapore FinTech Festival in November 2023, and are currently testing use cases in Ghana, Cambodia, Indonesia, and Rwanda.

The implementation of the initiative in selected countries builds on four pillars, which have been designed following extensive consultations and feedback from stakeholders, including the key insights that emerged from this roundtable. The four pillars include: Ecosystem engagement; Data infrastructure and UTC Platform developments; Capacity building, training and awareness for MSMEs; and Pilot and use case developments.

About United Nations Development Programme

As the United Nations lead agency on international development, UNDP works in 170 countries and territories to eradicate poverty and reduce inequality. UNDP helps countries to develop policies, leadership skills, partnering abilities, institutional capabilities, and to build resilience to achieve the Sustainable Development Goals. UNDP partners with people at all levels of society to help build nations that can withstand crisis, and drive and sustain the kind of growth that improves the quality of life for everyone.

www.undp.org

For up-to-date information and developments of the UTC, please visit the following website: UNDP Global Centre UTC Microsite: https://www.undp.org/policy-centre/singapore/events/join-us-singapore-fintech-festival-2023

For parties interested to provide thoughts, inputs, suggestions and indications of interest to partner in the adoption of the UTC, please reach out to: Aiaze Mitha (aiaze.mitha1@undp.org) or Francesca Puricelli (francesca.puricelli@undp.org).

25 Jun, 2024

New Delhi

Transformative AI Workshop for Financial Inclusion

Financial Inclusion

Digital Transformation

WHY THIS WORKSHOP STANDS OUT: THIS WORKSHOP GOES BEYOND THEORETICAL KNOWLEDGE, OFFERING A DEEP DIVE INTO THE PRACTICAL, REGULATORY, AND ETHICAL ASPECTS OF AI IN FINANCIAL SERVICES. WITH REAL-LIFE CASE STUDIES AND INTERACTIVE EXERCISES, PARTICIPANTS...

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Karandaaz unveils GreenFin Innovations, offering concessional finance for enabling green economy & combatting climate change

Apr 15, 2024

Karandaaz Pakistan, a development finance platform at the forefront of promoting financial inclusion and driving digital transformation across the country, announced the launch of GreenFin Innovations (GFI), a groundbreaking initiative dedicated to scaling innovative and sustainable solutions aimed at promoting a green economy and addressing the critical challenges of climate change in Pakistan.

GreenFin Innovations offers a unique blend of support, including concessional financing of up to PKR 50 million and tailored business development support, all while fostering connections within the climate change network. The initiative is committed to driving transformative change and local capacity building, to address urgent environmental and climate change challenges through innovative solutions.

Businesses registered and operating in Pakistan with a valid National Tax Number (NTN) are eligible for GreenFin Innovations support. The proposed solutions must actively address the climate change issues in adaptation, mitigation, or cross-cutting thematic areas.

Karandaaz Chairperson Salim Raza, while elaborating on the initiative, said,

"GreenFin Innovations is aimed at catalysing sustainable solutions to combat climate change in Pakistan. It provides blended finance in the form of concessional loans, with funding sizes varying based on the nature and scale of each project. GFI will empower businesses to play a pivotal role in promoting a green economy and mitigating the impacts of climate change."

In the past, Karandaaz has successfully provided growth capital to innovative solutions on plastic waste management, efficient water management, and air quality under their Green Challenge Fund (GCF). With the launch of GreenFin Innovations, Karandaaz aims to amplify the impact, recognising the urgency of building local capacity for innovation and scaling existing technologies to effectively tackle climate change challenges.

Shumaila Rifaqat, Head of Innovation and MEL at Karandaaz said,

"Pakistan is facing the dire effects of climate change. It is imperative that local capacity to address environmental and climate change challenges is developed and, in that endeavour, private sector has a huge role to play. To this end, GFI will provide the essential support and risk capital to catalyse innovation in addressing the climate challenge."

Karandaaz invites eligible businesses and entrepreneurs to join hands with GreenFin Innovations in creating a sustainable future and making a significant contribution to the fight against climate change. More information can be gathered from the official site: https://gfi.karandaaz.com.pk/

https://gfi.karandaaz.com.pk/

21 May, 2024

Jakarta

2024 Asia Grassroots Forum - Hosted by Member Amartha

Financial Inclusion

Gender Finance

Rural & Agriculture Finance

Sustainable Finance

We are partnering with our member Amartha to bring you the 2024 Asia Grassroots Forum which will be held on 21-22 May 2024 at the Park Hyatt in Jakarta, Indonesia. As a 'Though Partner", the Forum is helping build the agenda and bring relevant...

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EmpowerHer: Stories from the SME Finance Forum’s WEF CoP

Mar 09, 2024

The Forum established the Women’s Entrepreneurship Finance CoP (WEF CoP) Practice for groups of practitioners from member institutions to meet and share experiences, seek solutions to challenges that they face in financing women-SMEs. Since launching in 2022, the WEF CoP has evolved into a powerful example of how to empower women entrepreneurs through financial awareness, tailored financial services and promoting financial inclusion for women-led SMEs.

The primary goal of WEF CoP is to translate shared experiences and insights into practical knowledge applicable to better serve women-owned and women-led SMEs (W-SMEs). As a member driven community, it draws on the collective knowledge and experience of industry leaders and practitioners across regions, together with experts from IFC. The platform has facilitated knowledge sharing and connections amongst over 500 industry practitioners, providing practical solutions that members implement in their operations.

The community fosters open discussions, sharing insights, and exchanging ideas on various practical topics relevant to women entrepreneurs, including product design and delivery, business development, risk management, alternative data utilization, legal and regulatory matters, and more. Additionally, it provides a space to discuss the unique challenges faced by women entrepreneurs, fostering the exploration of mitigation techniques and solutions. Through this dialogue, members collectively contribute their unique cross regional experiences and insights, enriching the knowledge pool that benefits both women-owned SMEs and financial service providers.

On International Women’s Day/ Month 2024 we are pleased to showcase the remarkable work and impact of our member community in their respective markets and regions. Fostering partnerships, technology, and innovations, members develop unique solutions and products towards sustainable financial services for W-SMEs. These unique stories reflect the tremendous collective impact of our community in providing financial services to W-SMEs, thereby, closing the gender finance gap and facilitating W-SMEs full contribution to the global economy.

Here are some of the captivating stories and innovative initiatives from our remarkable community:

Small Business Silver Lining supports small business owners through its Silver Lining Action Plan (SLAP), a tech-enabled, data-driven program, which helps users set defined goals and plot an attainable route to them using behavioral psychology. Silver lining has worked with 14,000 small businesses in more than 76 countries, helping them to become more profitable and sustainable. Read more

Overview of the European Investment Bank’s support for gender equality and women’s economic empowerment. It details the Bank’s activities in the sector and highlights key projects. The stories, videos and case studies, illustrate how the Bank’s financing and advice help countries, regions and cities. Read more
Alraedah provides financial services to women-SMEs to achieve their business and personal financial goals, and thereby improve lives. In this video see how Alraedah supported the small dream of a W-SME into a leading confectionary business in Saudi Arabia. Watch the video
Stanbic IBTC’s strong commitment to empowering women led to the creation of an innovative value proposition called Blue Blossom. This unique offering provides women in business comprehensive financial (bank and non-bank) and non-financial benefits, empowering women to take control of their finances, future and live a fulfilling lifestyle. It provides solutions aimed to foster the growth and success of women entrepreneurs.
The GoBloom Community’s value proposition recognizes that today’s woman requires tailored non-financial solutions alongside comprehensive support to foster learning, connections, wellness, and personal development. Read more
FMO - Dutch entrepreneurial development bank's innovative women and climate project empowers rural women entrepreneurs in India and promotes the use of clean energy products to drive change. Read more

Access Bank Plc innovative 'W' initiative tailors products and services to meet the unique needs and requirements of women SMEs. In this video a client shares her experience, and the impact of the W-Power Loan on her business. Watch the video
Funding Societies | Modalku Group offers innovative alternative financing services to women-SMEs. In this video, the founder of a fast growing cookie bakery in Malaysia attests to the benefits and flexibility of Funding Societies | Modalku Group's Digital Financial Services. Watch the video

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Addressing Financial and Digital Literacy Challenges for Inclusive Finance: insights from Microfinance Institutions and FinTech Organisations.

Feb 14, 2024

This paper investigates strategies of European microfinance institutions (MFIs) and inclusive FinTech organisations to address financial and digital illiteracy among vulnerable customers. It reveals that both MFIs and FinTech organisations focus on personalised financial education, training and coaching but adopt distinct strategies in their approach.

The study highlights the crucial role of support teams in enhancing literacy and recommends a balance between digitalisation and human interaction, alongside advocating for governmental and EU educational initiatives.

This is the third paper resulting from a research project on “Strengthening Financial Inclusion through Digitalisation” (SFIDE), initiated by EIF’s Research & Market Analysis division. The project is funded by the EIB Institute under the EIB-University Sponsorship Programme (EIBURS). It aims to investigate the potential of technological and financial innovation to increase the efficiency of the inclusive finance sector, through the identification and promotion of best practices.

The EIF Working Papers are designed to make available to a wider readership selected topics and studies in relation to EIF´s business. The Working Papers are edited by the EIF and are typically authored or co-authored by EIF staff or are written in cooperation with EIF.

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This working paper was produced by The European Investment Fund, specialist provider of risk finance to benefit small and medium-sized enterprises (SME) across Europe.

https://www.eif.org/news_centre/publications/eif_working_paper_2024_97.pdf

14 Mar, 2024

Brasilia, Brazil

Powering Growth: Unlocking MSME Finance Through Policies, Innovation and Partnerships

Financial Education

Financial Inclusion

Alternative Financing

Equity

Gender Finance

Guarantees

Rural & Agriculture Finance

Supply & Value Chain Finance

Trade Finance

Youth Entrepreneurship

Embark on a transformative journey into the future of MSME finance at this in-person event organized by the Banco Central do Brasil (BCB) as a side event of the G20 and GPFI 1st Plenary of 2024, co-hosted by Sebrae and the SME Finance Forum! Elevate...

Scaling Finance, Creating Livelihoods, Achieving Impact - Powering SMEs and Economies!

Jan 11, 2024

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