Reply To: How can medium and small-sized businesses get their hands on trade financing?

[Alvin Adam]

Financial institutions face many obstacles when attempting to provide funding for small and medium-sized businesses (SMEs), with a lack of information being a major one.  The ability of small and medium-sized enterprises to secure financing is affected by a number of different factors. While some developed nations take a more free-market approach by providing few or no government incentives for small and medium-sized enterprise (SME) financing, others take precautions by offering guarantees or otherwise lowering the costs and risks involved. Most small and medium-sized enterprises (SMEs) in emerging economies are funded from sources outside the traditional financial sector. This is costly for the enterprise and can impede the flow of financing, thereby stifling its growth. With the global imposition of new financial regulations and banking regulations, financing for SMEs is becoming more challenging and expensive than ever before. In this context, new forms of financing enabled by technology, such as supply chain- and e-commerce-based financing, crowdfunding, and other innovations, may provide a means of escaping the information/cost trap.