The increased digitization of financial services and technological advances are enabling new types of providers – fintechs, with the potential to overcome traditional barriers to financing MSEs. Among others, they are able to lower the costs of acquiring and servicing customers, improve accuracy of credit assessments and lower credit risks, provide more tailored products and services, improve customer experience, disintermediate traditional value chains by directly connecting investors with borrowers, and enable rapid scaling and replication. CGAP surveyed the landscape of fintech providers in five emerging markets including India, Indonesia, Kenya, Nigeria and Peru, and identified four business models with high potential to serve underserved and excluded MSEs - data driven finance, marketplace finance, digital banking, and embedded finance. To test the potential of these models, CGAP has also forged learning partnerships with five innovative fintech providers from across the world to pilot digital credit products for MSEs.
