Micro, small, and medium-sized enterprises (MSMEs) play a critical role in economic growth and wage employment in both developed and developing economies, yet significant obstacles remain in unlocking the potential of these businesses - especially as regards access to credit. A confluence of three new market trends is reshaping longstanding efforts to overcome this dilemma: 1) increasing access to real-time, 'electronically verifiable' cash-flows; 2) the mining of cash-flow data to reveal insights into repayment likelihood beyond that discoverable in traditional credit analysis; and 3) the adoption of financial technology and certain principles of microfinance lending - most specifically uncollateralized lending and frequent incremental repayment - to meet the funding needs of MSMEs. This paper explores the interrelationship of these trends and contends that, together, they enable suitably empowered financial institutions to originate and manage short-term, unsecured loans to formal MSMEs on a profitable and scalable basis.

Carroll, P. and Hoffman, B. (2013) Financing Small Businesses: How ‘New-Form Lending’ Will Reshape Small Business Strategies, New York: Oliver Wyman.

Chironga, M., Dahl, J., Goland, T., Pinshaw, G. and Sonnekus, M. (2012) Micro-, Small and Medium-sized Enterprises in Emerging Markets: How Banks Can Grasp a $350 Billion Opportunity, New York: McKinsey & Company.

Rosenberg, E. and Gleit, A. (1994) ‘Quantitative methods in credit management: a review’, Operations Research 42: 589-613.

Stein, P., Goland, T. and Schiff, R. (2010) Two Trillion & Counting: Assessing the Credit Gap for Micro, Small and Medium-size Enterprises in the Developing World, Washington, DC: International Finance Corporation; New York: McKinsey & Company.

Carroll, P. and Hoffman, B. (2013) Financing Small Businesses: How ‘New-Form Lending’ Will Reshape Small Business Strategies, New York: Oliver Wyman.

Chironga, M., Dahl, J., Goland, T., Pinshaw, G. and Sonnekus, M. (2012) Micro-, Small and Medium-sized Enterprises in Emerging Markets: How Banks Can Grasp a $350 Billion Opportunity, New York: McKinsey & Company.

Rosenberg, E. and Gleit, A. (1994) ‘Quantitative methods in credit management: a review’, Operations Research 42: 589-613.

Stein, P., Goland, T. and Schiff, R. (2010) Two Trillion & Counting: Assessing the Credit Gap for Micro, Small and Medium-size Enterprises in the Developing World, Washington, DC: International Finance Corporation; New York: McKinsey & Company.

Carroll, P. and Hoffman, B. (2013) Financing Small Businesses: How ‘New-Form Lending’ Will Reshape Small Business Strategies, New York: Oliver Wyman.

Chironga, M., Dahl, J., Goland, T., Pinshaw, G. and Sonnekus, M. (2012) Micro-, Small and Medium-sized Enterprises in Emerging Markets: How Banks Can Grasp a $350 Billion Opportunity, New York: McKinsey & Company.

Rosenberg, E. and Gleit, A. (1994) ‘Quantitative methods in credit management: a review’, Operations Research 42: 589-613.

Stein, P., Goland, T. and Schiff, R. (2010) Two Trillion & Counting: Assessing the Credit Gap for Micro, Small and Medium-size Enterprises in the Developing World, Washington, DC: International Finance Corporation; New York: McKinsey & Company.

Carroll, P. and Hoffman, B. (2013) Financing Small Businesses: How ‘New-Form Lending’ Will Reshape Small Business Strategies, New York: Oliver Wyman.

Chironga, M., Dahl, J., Goland, T., Pinshaw, G. and Sonnekus, M. (2012) Micro-, Small and Medium-sized Enterprises in Emerging Markets: How Banks Can Grasp a $350 Billion Opportunity, New York: McKinsey & Company.

Rosenberg, E. and Gleit, A. (1994) ‘Quantitative methods in credit management: a review’, Operations Research 42: 589-613.

Stein, P., Goland, T. and Schiff, R. (2010) Two Trillion & Counting: Assessing the Credit Gap for Micro, Small and Medium-size Enterprises in the Developing World, Washington, DC: International Finance Corporation; New York: McKinsey & Company.