woman sitting at desk sewing Photo by Lorena Velasco - Colombia

Micro and Small Enterprises

Millions of low-income households in emerging markets rely on micro and small enterprises (MSEs) to pursue economic opportunity and build resilience. MSEs are very small, semi-formal businesses with few employees, facing a myriad of challenges that constrain their stability and growth, including access to relevant and affordable financing. The global unmet credit needs of MSEs remain persistently high at US$ 4.9 trillion. 

Traditional financial service providers find it expensive, risky, and complex to lend to MSEs due to their demand for small loan sizes, limited credit histories, insufficient or inaccurate data, and lack of collateral. 

However, technological advances and business model innovations are enabling a new type of providers – fintechs, to use alternative, digital data and underwrite loans, automate credit processes, and combine finance with non-financial services to achieve lower operating costs, improve risk assessment and enhance product offerings for MSEs. 

This comes at an opportune time since MSEs are also accelerating their embrace of digital technologies like social media, e-commerce platforms, digital invoicing, and digital modes of payments for their businesses, especially in the wake of the COVID-19 pandemic, positioning them to access newer and alternative sources of finance provided by fintechs. 

CGAP’s program on MSE Finance in the Digital Age explores the enabling role of digital finance in strengthening MSEs as a pathway to improved livelihoods. 

Latest Research


Building Value in Microfinance Through Digitization: Lessons from Loan Automation Pilots

Digitization has brought both hope and frustration to the microfinance industry. To address this, we identified and tested five core principles for successful implementation. This focus note summarizes our experience, evaluates the validity of the five principles, and offers key lessons learned for other industry stakeholders to adopt and scale a similar approach.

Building Value in Microfinance Through Digitization: A Role for Funders

This note highlights the importance of funders in supporting the digital transformation of microfinance institutions (MFIs). The focus is on business intelligence and credit renewal automation to increase the success rate of MFI digitization. Funders play a crucial role in ensuring that MFIs continue to serve the most excluded and underserved customers in the future.
Reading Deck

The Promise of Fintech for Micro and Small Enterprises

Nearly 500 million micro and small enterprises (MSEs) are estimated to be operating around the world. Access to credit and other financial services is critical to the growth and sustainability of these businesses, and consequentially to the low-income and vulnerable populations which rely on MSEs for their livelihoods. Yet despite decades of efforts and some notable successes in expanding MSE finance, the credit gap remains an estimated 4.9 trillion U.S. dollars.

Latest Blogs


BNPL in Nigeria: Emerging Fintech Innovations for MSEs

Findings from our recent research suggest BNPL is becoming a significant lending mechanism for Nigerians – especially for micro, small and medium enterprises and self-employed individuals who would not otherwise have access to credit.

Can Kenya’s Fintech Boom Address the MSE Finance Gap?

Kenya has seen an explosion of fintechs and nano credit providers, but they have yet to meaningfully serve MSEs in the country. We explain how fintechs could have a wider reach and distinct value proposition for MSEs in Kenya beyond digital credit.

Why Don’t MSEs Trust Digital Credit Providers?

Lack of trust in formal financial service providers among MSEs (especially the smallest, poorest, and women-owned enterprises) is a looming concern. While technology offers hope, more needs to be done to gain the trust of customers at the last mile.