Paper

E-Finance and Small and Medium-size Enterprises (SMEs) in Developing and Transition Economies

Can e-finance strengthen small and medium enterprise initiatives?

This paper discusses the potential contribution of e-finance for facilitating the development of small and medium enterprises (SMEs) in developing countries. The authors:

  • Draw conclusions about the success of e-finance based on their global experiences;
  • Analyze e-finance initiatives for supporting SME development;
  • Examine ways of promoting SME development through e-finance in the future.

Some of the common misconceptions about e-finance are:

  • Cost reduction potential: Though e-finance leads to cost reduction, its extent is exaggerated;
  • Ease of implementation: While it is cheap and easy to create a basic website, designing and implementing a fully functional, industrial strength application requires time;
  • Revolutionary impact: Changes are gradual and occur inside the established systems and structures;
  • Disintermediation: New categories of intermediaries, such as financial portals and transaction aggregators also emerge.

At present e-commerce for SMEs focuses on two types of services:

  • SME specific information networks;
  • Investor networks.

Some of the private sector efforts for supporting SMEs through e-commerce are:

  • Business portals for providing cheap, convenient answers to variety of small business needs;
  • Business to business market places for SMEs.

The authors point out some of the challenges for developing SMEs through e-commerce as:

  • Reconciling incompatible opposites: global and local, digital opportunity and digital divide, public and private, closed and open.
    Developing new forms of business organizations: new cross-border, cross-sectoral cooperative and partnership arrangements.

About this Publication

By Goldfinger, C., Perrin, J.
Published