• The MSME market remains out of reach for banks in emerging markets
• Fintech provides opportunities to bridge that gap between banks and MSMEs
• Businesses generate vast amounts of data that banks can use

Two issues have recurred repeatedly in emerging markets: first, the micro, small and medium enterprises (MSMEs) segment becomes the most important non-retail market for banks’ lending products; and second, financial information regarding potential borrowers in that market remain lacking. Considering the significance of MSMEs to economic growth and bank profitability, it becomes imperative for any bank that wants to be a significant national player to weather these challenges and engage in the MSME market.

The good news is, banks are by no means out of moves. They can implement several strategies to address this segment of the market. For one, banks could focus on middle-market companies that provide financial statements, albeit often of unreliable quality. Fully collateralised loans and interview-type assessment processes are also feasible options.

This is where fintech comes into play. It is something that could address the MSME market without the drawbacks of subjective interviews and the constraints of secured lending. Utilised correctly, fintech can provide banks the right data on borrowers and segments that they need to make rational lending decisions.

Establishing a link with MSMEs through fintech

Fintech has already spread through banks in most parts of the world. Even Africa, which some regard as a technological backwater, has had innovations in financial services. In a report by the GSM Association — an industry organisation representing the interest of mobile network operators around the world — it had been noted that over 57% of the world’s mobile money accounts are located in sub-Saharan Africa. The same report also projected the continent’s fintech mark...

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