Solving the Inconvenient Access to Credit for MSMEs

“SMEs are less likely to be able to obtain bank loans than large firms; instead, they rely on internal funds, or cash from friends and family, to launch and initially run their enterprises” — World Bank.

According to the global record, formal SMEs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies. The number stood even higher when micro and informal SMEs are included. However, access to finance often impedes MSME’s growth. With the lack of access to financial capital, many MSMEs find it difficult to grow, and their business oftentimes reaches a period of stagnation or even languishes.

In comparison to large firms, SMEs are less likely to be able to obtain bank loans, and this is when we talk about formal SMEs only. The financing gap is even larger when micro and informal enterprises are taken into account. The number increases to 70%, representing the micro, small, and medium-sized enterprises (MSMEs) in emerging markets which still lack access to credit.

On the other hand, financial institutions, such as banks and insurance companies, require credit scoring or credibility status of whoever wants to apply a credit proposal. Though MSMEs have a massive contribution to the emerging markets, the absence of credit scoring and lack of credibility status make it hard for them to obtain future fund from financial institutions.

What we do

A key area of Tokoin’s work is to accelerate MSMEs by providing convenient access to finance and finding innovative solutions to unlock sources of capital. We make use of the blockchain technology on our platform, combining digital identity and digital ledger to build MSMEs’ credit scoring and to increase their economic scale. This technology has a similar function to a bank account for its transactional recording. However, the blockchain grants the users direct authority to share their assets to whoever they trust.

With the proper technological implementation, we facilitate the MSME sector to embrace economic inclusion. The idea is to bring prosperity to MSMEs. In this modern business ecosystem, Tokoin allows MSMEs to have financial records similar to those of the banks. Every transaction that is initiated on Tokoin’s platform is accurately recorded with timestamps.

Therefore, Tokoin facilitates MSMEs to have a better record of financial transactions as a form of credit history to build the credibility status of their business. The transaction history of the MSMEs can guarantee feasibility for them to access various business solutions.