Fintech As Solution For Financing SMEs



The economy growth in developing countries such as Indonesia and India increased in the last decade. Along with that, the development of fintech also increased. Alternative financing is needed to stimulate the economy. In particular, for the micro small and medium enterprises (SMEs). Since there are still many SMEs are having difficulties to gain access to bank, therefore financing models such as financial technology (fintech) is required to reach them.

In Indonesia, fintech is expected to extend their financial services to the SME sector. According to Institute for Development of Economics and Finance (Indef) research, currently there are about 11 million SMEs are using bank services (bankable). The remaining approximately 49 million are unbankable, which can be potential target for Fintech.

Fintech has the advantage to leveling loan portfolio because it can reach remote areas or small towns. Moreover, banks are also having trouble channeling into the corners for taking into account their operational costs. Fintech can also be a part of expanding the range of financial services or financial inclusion. There are innovations in terms of products, services, as well as a business model. Furthermore, fintech also can reduce the cost and time of provision of financial services.

Based on their data, the transaction value of financial technology companies this year is expected to reach US $ 18.65 billion, or Rp 251.77 trillion (assuming an exchange rate of Rp 13,500 per US dollar). Of that amount, approximately US $ 18.61 billion is contributed by digital payments. The industry is expected to continue growing. With average growth per year to reach 18.8 percent, in 2021 the transaction value will reach US $ 37.15 billion, or Rp 501.52 trillion. The opportunity for fintech business to reach small and medium enterprises in the country is still wide open.