How does your proposed innovation leverage public intervention in catalyzing private SME finance?
This innovation will eliminate exclusion of rural entrepreneurs without collateral from accessing loans provided by private sources
What barriers does your proposed solution address?
Asymmetry of information, Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for financial intermediaries to serve SMEs, Lack of financing to women entrepreneurs.
If you checked any of these barriers, describe how your solution addresses them
a) Asymmetry of information
Financial markets usually are not accessed by the majority of the rural and urban enterprising poor due to lack of information about procedures, loan terms and conditions, competition, general functional literacy among the potential clients,
Too much formal process and procedures scares away the most enterprising users of financial markets.
c) Lack of collateral
This probably has been the biggest barrier. Financial institution have remained traditional in approach to lending. Traditional forms of collateral such as title deeds to land, building ownership, etc demanded hinder enterprise development and poverty elimination among the poor in the developing countries. This innovation will demonstrate how to overcome this obstacle where the so called risky clients can use their communal natural resources ownership as a vehicle for accessing finance, and would like to show case how these arrangements can be used as mechanism for inclusiveness in facilitating supply of finance to MSME.
d) Lack of financial capacity
Many enterprising poor lack financial capacity to invest in some businesses of their choice and reasonable scale to generate income and assure prosperity. The size of SME usually determine its attractiveness for financing by Banks. This solution will give opportunity to a wide range of entreprenuers to test their viable business ideas and participate in improving thier well-being.
e) Lack of SME access to skills / knowledge / markets
Marginalized communities and SME usually fail to perform, compete and upgrade to meet expectations of their clients. The major factors are limited skills/knowledge and very limited exposure to sustainable markets. This innovation will stimulate value chain finance supply markets that simultaneously accelerate access to emebbeded business skills/knowledge/technologies and practice held by lead firms.
f) Unavailability of financial products tailored to SME needs
Conventional sources of micro- finance and SME finance treat all borrower community as homogenous. This is absolutely wrong. This innovation will demonstrate alternatives to ensure each entrepreneur is given opportunity to implement their viable business plans
g) Lack of institutional capacity of financial intermediaries
Most financial intermediaries are located in towns, yet majority of seekers of financial services are located remoate rural areas where some infrastructure may be nono existent. However, with increasing access to mobile phone, internet and SMS technology based communication, there is no more excuse of exculison of the rural populations. This solution will stumulate financial institutions to adopt improved technologies such e-banking services and e-commerce to serve the disadvantaged locations
h) High transaction costs for financial intermediaries to serve SMEs
Cost of doing business is usually major excuse for failed SME financing of rural based businesses. This Innovation will faciliate investment and strive to stimulate adoption and application e-technologies like mobile banking services, bulk market information delivery and to provide real-time access to financial and commercial services by those usually excluded due to their geographical positioning.
i) Lack of financing to women entrepreneurs
Women entrepreneurs are the most disadvantaged in terms of accessing financial products and services. This innovation will address women’s unique business finance needs and support their innovative ideas, with special deserving attention