MSME Access to Finance: The Role of Digital Payments

Abstract

Technology has demonstrated its potential to transform money, payments, and finance within a growing social digital transformation. While key stakeholders focus on building public infrastructure to enable faster transition towards digital economies, it is important to look inward and leverage the available developmental options that may benefit the actualisation of sustainable development goals with minimal adverse financial and economic implications. MSMEs provide the necessary pedestal to reach a larger population of unbanked and underserved segments necessary for broader financial inclusion and inclusive economic development. If this is acknowledged, ensuring their sustainability through the provision of adequate support and finance must be at the core of present policy considerations to benefit this critical group and the extended population they provide for. Ultimately, the COVID-19 implications have paradoxically presented an important opportunity for policy makers and key stakeholders to harness the existing factors surrounding individual economies in recalibrating their present and long-term recovery efforts to ensure a more resilient and inclusive economy that caters to not just the privileged, but also the neglected.

Around the globe, there is an increasing focus on ways to exploit the potential of emerging digital financial technologies, including digital payments, to accelerate MSME access to finance and achieve the United Nations Sustainable Development Goals (SDGs). Yet, achieving these envisaged benefits will require thoughtful consideration and management of various systemic risks and impacts across jurisdictions and governance levels.

In this report, we examine how digitalisation, particularly digital payments innovations and innovative payment initiatives, such as central bank digital currencies (CBDCs), can play a pivotal role in fostering micro, small and medium enterprise (MSME) access to finance.

Keywords: FinTech, BigTech, RegTech, CBDCs, Financial Inclusion, MSMEs, SDGs, Digital Currencies, Open banking, Gender-equality, Blockchain, Digital Identity, Smart Contracts, Distributed Ledgers, Payment Services, Robo Adviser, Mobile Money, TechFin, Aadhaar, eIDAS, KYC, Cyberrisk, BigData, Data Protection

JEL Classification: O00, O16, O32, O33, O38, K10, K20, K22, K33