Financial Inclusion Diaries

FINANCIAL INCLUSION

Financial inclusion is one of the cornerstones of the growth strategy of every country for achieving the goals of promoting savings and resilience, enabling business investment, growth, and wealth creation. In many developing countries, the leading factors that constrain access to finance for businesses of all sizes, particularly the smaller businesses, include:

Information Asymmetries

Perception of high risk due to significant information asymmetries that exist in the market due to an absence of a sufficiently developed credit reporting system, and high level of informality within the economy.

Inadequate Collateral

Dependence of banks on traditional collateral, such as real estate, which MSMEs cannot adequately provide.

Inadequate Financials

Lack of reliable financial statements for smaller businesses make it difficult for banks to assess risks and therefore leads to their reluctance to lend.

Inappropriate Tools

Lack of bank strategies, processes, lending methodologies, and financial instruments (such as factoring, and leasing) to lend to this segment.

The absence of an ecosystem for Venture Capital and Private Equity.