Business and finance experts believe that small and medium-sized businesses are always the strong backbone of the world economy. However, these businesses do not get bank loans more quickly than their larger peers in the market. This makes it hard for them to open a new line of credit. They face challenges when it comes to daily financing their business operations for this reason. On top of this, there is a small percentage of FinTech companies to focus on offering funds to small to medium-scale businesses in the world.
Kavan Choksi- why is digital finance the need of the hour?
Kavan Choksi is an expert in finance and economics. He is an investor and an eminent wealth management consultant who has guided many businesses to enjoy lucrative profits in the global economy. According to him small to medium-scale companies account for about 7 out of 10 jobs in the emerging world economy. They roughly account for almost 90% of the businesses in the world and over 50% of the world’s economy.
According to reports emitted by the World Bank, these formal SMEs generate nearly 40% of the national income or the GDP in emerging global economies.
Irrespective of the above figures, the World Bank estimates a value of $5.2 trillion fund gap for small and medium-scale businesses across 65 million MSMEs across 125 nations that were studied. These businesses are less likely than giant corporations to get bank loans, so they need to bank on the funds that they generate from their internal operations. There is about one-half of registered businesses in the above group do not have access to conventional modes of credit.
Limited access to credit is the major obstacle to the growth of SMBs in the economy
Business experts believe that small businesses have limited access to credit, and this is the primary reason that hinders their growth in the market. Sadly, banks often reject over 50% of the finance requests received from small to medium-scale businesses. They ask these businesses to give collaterals or impose other financial requirements that are challenging for them to produce to obtain the funds.
Moreover, minor to medium-scale businesses should pay their suppliers quickly, so they land up strapped for cash most of the time after they deliver their goods.
Fintechs can help small to medium-scale businesses
Business and finance specialist Kavan Choksi adds that FinTech firms and other companies that specialize in trade finance can help SMBs to a large extent to expand their profits. If they cannot manage their cash flow, they will not be able to make profits for the company.
Fintech companies play a vital role in the global economy as they understand the needs of small to medium-scale businesses. They can play an instrumental role in helping these companies to grow. According to the CGAP, about two-thirds of the region’s FinTech concentrates totally on the UAE, Saudi Arabia, and Egypt. They have all attempted to make frameworks with friendly regulations for these firms.
