The common problem who strain the growth of MSMEs often said is the difficulties to find the business fund. MSME lacks access to funding that strains them to expansion opportunities. World Bank studies say that there are around 200–245 million MSME that couldn’t earn business loan.
Though many have agreed that business loan will assist MSME to growth, still there are always happened rejection cases of business credit appliance.
There are two types of requirement stated by banks for MSME credit appliance; (1) The general requirement in the form of a legal document who will prove the validity of a business unit, (2) The credit appliance through Capital and Collateral.
Credit appliance through legal documents
Credit appliance requires the applicant to provide some documents in order to obtain credit or funding from financial institutions. On the first step which is the KYC, MSME couldn’t even fulfil the necessities. Many of the MSMEs are still operating in an unauthorized way, we call it “the informal” sector.
Lackness of legal documents also burdens them to do their financial report. They often fail to provide credible management and financial record. Not only the informal MSMEs, the formal MSMEs are also often couldn’t provide a proper financial and transaction record to be reported.
Even when they have already qualified in the term of economy capacity, document incompleteness of legal documents and transaction record of their daily business operation makes them still unbankable.
The capital and collateral credit appliance
Next, are Capital and Collateral. Most of MSME do not possess any property which can be utilized as collateral. Ironically for MSME, because they need this as collateral to obtain credit and funding in order to expand their business. Most financial institutions loan requires collateral as the mechanism of its mitigation risk.
This difficulties of credit absence situation often lead them to access individual credit, even sometimes with a high and unmeasurable interest rate. This could be harmful to MSME’s business growth.
However, there is another safer option for MSME to grow. Utilizing the technology infrastructure to make a structured, compiled record of their data in the form of valuable asset.
Tokoin facilitates the MSMEs with the processing and distribution of data between related participants of the digital business ecosystem. If only the MSME could provide a better, complete and competent data in the form of valuable asset, the bank could obtain substantial and appropriate information about the character and credibility of a business unit. In Tokoin, data information from MSME will be validated as the asset that contains values.