CGAP launched a call for expressions of interest for partners to pilot technology-enabled business models for advancing excluded or underserved micro and small enterprises' (MSEs') access to responsible credit.
MSEs are one of the strongest drivers of economic development and employment creation. Access to finance remains a significant constraint for MSEs globally to survive shocks or grow their business. Despite decades of investments and a vibrant financial inclusion industry, the MSE credit gap, now estimated at almost US$5 trillion globally, has proven to be a structural feature, even in countries that boost supportive financial inclusion policies and regulations.
Advances in technology, such as mobile connectivity, big data analytics, artificial intelligence, machine learning and application programming interfaces (APIs), have disrupted the financial services industry, resulting in the emergence of new business models and digital financial products for MSEs. These technological advances show promise in overcoming traditional supply-side barriers to serving excluded MSEs. MSEs can also experiencing significant benefits through increased access to affordable, responsible and tailored credit products.
CGAP aims to support up to six firms that are using technology in innovative ways to serve MSEs. The pilots will test technology enabled innovations which will allow the firms to introduce, improve or expand responsible digital credit offerings to underserved or excluded MSE segments. This should result in significant impact for the targeted MSEs, measured in terms of improved cost of credit, loan terms tailored to the needs of individual MSEs, product diversification and increased accessibility, client centric product design, etc. The pilots aim to understand how technology can push the barriers of financial inclusion in a scalable manner.