How G20 can address finance challenge for entrepreneurs and businesses

How G20 can address finance challenge for entrepreneurs and businesses

Image: Twitter/BJP

~400M MSMEs in emerging economies lack adequate financing instruments. It is estimated that the total MSME credit gap is around $5.2 trillion. So, how G20 can help alleviate MSMEs’ financing challenges

~400M MSMEs in emerging economies lack adequate financing instruments. It is estimated that the total MSME credit gap is around $5.2 trillion. So, how G20 can help alleviate MSMEs’ financing challenges

Promoting fintech solutions

Promoting fintech solutions

Fintech platforms have emerged as catalysts worldwide, achieving tremendous success in the last five years, thus providing MSMEs with hope for the rapid growth and resolution of their problems

Fintech platforms have emerged as catalysts worldwide, achieving tremendous success in the last five years, thus providing MSMEs with hope for the rapid growth and resolution of their problems

The G20 should develop a mechanism for promoting the adoption of fintech solutions in member countries as well as in other developing countries and least developed countries (LDCs)

The G20 should develop a mechanism for promoting the adoption of fintech solutions in member countries as well as in other developing countries and least developed countries (LDCs)

Image: Twitter/Sidhant Sibal

Image: Twitter/Sidhant Sibal

Addressing information asymmetry

Addressing information asymmetry

Lack of accurate information about informal MSMEs makes credit access uncertain and default risks high. This is exacerbated by lack of digitised public info, digital footprint of MSME transactions, data scarcity & poor data quality

Lack of accurate information about informal MSMEs makes credit access uncertain and default risks high. This is exacerbated by lack of digitised public info, digital footprint of MSME transactions, data scarcity & poor data quality

Image: Twitter/Sidhant Sibal

Image: Twitter/Sidhant Sibal

The G20 could address these challenges by issuing guidance and developing a framework on how to source and process data by using unique identifiers such as passports, social security numbers, and tax identification numbers

The G20 could address these challenges by issuing guidance and developing a framework on how to source and process data by using unique identifiers such as passports, social security numbers, and tax identification numbers

Image: Reuters

Image: Reuters

Leveraging on the cooperative model

G20 could adopt the cooperative model as a potent supplementary financing instrument towards supporting the MSMEs’ growth and diversification and to generate and promote jobs in developing countries and LDCs

G20 could adopt the cooperative model as a potent supplementary financing instrument towards supporting the MSMEs’ growth and diversification and to generate and promote jobs in developing countries and LDCs

Image: Reuters

Image: Reuters

Innovative financing options

Innovative financing options, both public and private, would be highly effective sources of MSME funding. De-risking is an interesting risk mitigation strategy. Similarly, impact investors could change MSME funding patterns

Innovative financing options, both public and private, would be highly effective sources of MSME funding. De-risking is an interesting risk mitigation strategy. Similarly, impact investors could change MSME funding patterns

Image: Reuters

Image: Reuters

Guarantee schemes, impact investing microfinance, sustainability-related financial instruments, alternative risk models, etc., indicate that public or donor funding can unlock private finance for MSMEs

Guarantee schemes, impact investing microfinance, sustainability-related financial instruments, alternative risk models, etc., indicate that public or donor funding can unlock private finance for MSMEs

Image: Reuters

Image: Reuters

G20 should develop frameworks for countries to bridge the financing gap and increase connectivity between suppliers and last-mile delivery through its Digital Economy and Development Working Groups

G20 should develop frameworks for countries to bridge the financing gap and increase connectivity between suppliers and last-mile delivery through its Digital Economy and Development Working Groups

Image: Reuters

Info source: Addressing MSMEs’ Financing Challenges Through G20 Action, T20 Policy Brief, July 2023

Info source: Addressing MSMEs’ Financing Challenges Through G20 Action, T20 Policy Brief, July 2023

Image: Reuters