Preface
xvi
Meanwhile, growing opportunities are also encouraging governments and international
societies to develop regulatory frameworks, especially for start-up businesses.
Traditionally, the lending and monitoring criteria of financial institutions for SME
loans depended heavily on the judgements of experienced bankers. However, ample
and timely information made available by new technology and big data now allow
inexperienced individuals to make investment decisions. Crowdfunding, peer-to-peer
(P2P) lending, and other new tools can support start-up finance, but they carry unique
and inherent risks. Investors are at risk of losing their invested funds, and SMEs relying
on such funding face the possibility of capital suddenly dryingup or becoming more
expensive in the future. Fraud, information leakages, and cyberattacks are additional
concerns. The challenge for regulators is to protect investors and maintain financial
stability while simultaneously maintaining an innovative market by harmonizing fair
law enforcement, making appropriate interventions in the economy, and fostering
technology advancement. The development of a sensible regulatory framework is
crucial as the foundation of a vibrant and trustworthy business environment.
The rapid development of fintech is increasing the need for financial education.
Although fintech lowers the barriers to financing and investment, the fundamental
risks and organizational limitations remain. Therefore, SMEs need to improve their
financial literacy to take the most advantage of the financial opportunities made
possible by fintech. Also, SMEs themselves can use fintech as a tool for analyzing
their own businesses and improving performance. In this rapidly changing business
environment, SMEs are required to actively respond to transformation without getting
swept away by the trend.
The purpose of this book is to identify and develop ideas on how to utilize new
technology in SME finance. Eective utilization should encourage financial institutions
and investors to further develop credit risk analysis, increase financing, and contribute
to the sustainable growth of SME sectors. Further, this book will explore ways in which
policymakers and market participants can maximize the benefits of and mitigate the
potential risks arising from the new digital era. Thecontent of the book is based on the
research presented at the conference, “HowDigital Innovation Can Help Small and
Medium-sized Enterprise (SME) Access to Finance in Asia,” organized by the Asian
Development Bank Institute and the NCB in October 2018.
The first three chapters focus on the financial accessibility of SMEs using emerging
financial technologies. Chapter 1 overviews the SME credit gap in Asia and assesses
ways for SMEs to improve their access to financial services. It further discusses
the ways to boost long-term economic growth using emerging technologies and