Regulation and Supervision

Alternative finance (AF) or "crowdfunding" is the most notable financial technology (fintech) business model in Latin America and the Caribbean. Although still small in volume, reaching US$110.46 million across the region, its rapid growth poses a challenge for regulators. This paper offers a conceptual understanding of the typical enterprise model for AF, and from it describes the main challenges for regulators.

Fintech is everywhere these days, and for good reason. The financial technology sector, which includes companies like LendingClub, Square and Kabbage (together termed Marketplace Lenders (MPLs) has disrupted traditional banking practices like loans and payments.

This Guideline Note was developed by the AFI SME Finance (SMEF) Working Group. The information presented here is based on evidence and findings from two surveys conducted with over 25 SMEF WG member institutions in seven regions, as well as secondary research. The purpose of the Guideline Note is to share the experiences and practices of member countries that have implemented various policy initiatives to increase access to financing for SMEs. The initiatives are organized by the overarching objectives the member countries aimed to achieve.

The Ministry of Small and Medium Enterprises and Cooperative Development is finalising Micro Small and Medium Enterprises (MSMEs) formalisation strategy. As we rally in supporting this important thrust, I found it necessary to look at the experience of Costa Rica. By and large, the economic structure and geographical factors of Costa Rica are different from Zimbabwe. However, the circumstances of the MSMEs in Costa Rica appeals to Zimbabwe situation.  It is therefore necessary to compare lessons.

Small and medium-sized enterprises (SMEs) play a crucial role for employment, job creation, investment, innovation and economic growth around the world. They account for about 90% of businesses and more than 50% of employment worldwide, and are therefore crucial for the recovery of the world’s economy. Considering this important role, it is critical to ensure that viable SMEs around the world have access to the credit they need to expand.

May 20, 2016 - Development finance institutions (DFI) convened in Rome for a two-day event to discuss strategies for accelerating the growth of small businesses. This year’s event focused particularly on 'last mile' customers in rural areas such as small-holder farmers, women and youth. They are often the most neglected segments when it comes to banks but they represent huge potential for returns in the long run.

Alternative small business lenders seem to be preparing for a regulatory storm – or, at least, for increased communication with policymakers.

Another SME financing advocacy group has been formed, this time by OnDeck, Kabbage and CAN Capital.

The experiences of recent years have exposed a range of vulnerabilities in the financial system, calling into question the social value of financial institutions and core financial activities. Policymakers and financial institutions have come a long way in introducing important reforms, but much more work remains before the bonds of trust between the system and society can be repaired.

Having been spurned by banks, many small business owners are finding a funding lifeline with non-bank lenders. Specialist asset financiers, debtor financiers, factoring companies as well as an ever increasing number of marketplace lenders now offer a bewildering array of options to SMEs.

By Paul Rohan, Financial Services, Payments Technology, Payments Regulation