Paper
E-Finance and Small and Medium-size Enterprises (SMEs) in Developing and Transition Economies
Can e-finance strengthen small and medium enterprise initiatives?
41 pages
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.
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