The World Bank Group has launched a strategy to use digital payments, business data and fintech partnerships to expand financing for micro, small and medium-sized enterprises, arguing that better access to capital is essential to closing the developing world’s widening jobs gap.
Speaking at the World Bank Group and IMF Annual Meetings in Bangkok, World Bank President Ajay Banga said MSMEs account for about 90% of businesses globally and employ roughly 75% of workers in developing countries.
Their role, he said, will become even more critical as 1.2 billion young people in the developing world reach working age over the next 10 to 15 years.
Those countries, however, are expected to create only about 420 million jobs during the same period, leaving a potential shortfall of hundreds of millions of employment opportunities.
“What happens to that generation will shape far more than the countries where they live,” Banga said, warning that job creation depends on businesses being able to start, expand, hire, trade and compete.
Four-part strategy
Banga described the World Bank’s new MSME strategy through four objectives: making businesses visible, connected, enabled and funded.
The “visible” component aims to bring more small businesses into the formal digital economy.
Fewer than one in three MSMEs in developing countries are currently digitized, while about 60% of payments are still made in cash, according to figures cited during the event.
Banga said digital fast-payment systems, electronic invoicing, tax records and utility-payment histories could create the transaction records lenders need to assess a company’s financial health. In his phrase, “data is the new collateral.”
The World Bank says it has helped 20 countries establish interoperable fast-payment infrastructure over the past three years.
It has also supported e-invoicing and digital access to tax and utility data in eight countries, as well as open-finance frameworks in five.
The second objective, making firms “connected,” involves linking MSMEs with customers, suppliers, logistics providers and affordable professional services.
Banga pointed to digital shared-service platforms that could provide accounting, compliance and export guidance to thousands of small businesses at lower cost.
He also cited AgriConnect, a digital initiative designed to connect smallholder farmers and cooperatives with buyers, financiers and shared infrastructure such as storage facilities.
The “enabled” pillar focuses on reducing regulatory burdens. Banga said complicated licensing requirements, high compliance costs and weak insolvency systems push entrepreneurs into informality and discourage expansion.
The World Bank said it has helped 35 countries reduce red tape, 10 improve insolvency systems and seven reform procurement and competition rules to support MSMEs over the past three years.
The final pillar, “funded,” seeks to expand lending through fintechs, digital platforms, banks and institutional investors.
Fintech companies are already using artificial intelligence and alternative data to approve loans in as little as 24 hours, without relying solely on balance sheets or physical collateral.
Banga said fintech lending in emerging markets has reached approximately $400 billion.
He also argued that ride- hailing companies, e-commerce platforms, exporters and other aggregators could become important sources of finance because they hold detailed transaction and receivables data on small businesses.
A financing gap of more than $4 trillion
The World Bank president said MSMEs in developing countries face an annual financing gap exceeding $4 trillion.
He attributed the gap partly to the way banks are regulated and the costs associated with serving small borrowers. Under current rules, banks may need to hold roughly four times more capital against lending to an unrated small business than to a highly rated corporation.
Small companies also frequently lack the real estate and other hard assets banks traditionally require as collateral. At the same time, small loans can be expensive to originate and service.
Banga said the World Bank plans to help banks share risks, provide equity and loans to fintechs and aggregators, and develop legal frameworks for asset-based lending and securitization. Securitization could package pools of MSME loans into investment products attractive to pension funds, asset managers and other institutional investors.
The institution has already invested in more than 100 fintechs and aggregators, he said.
Banga also emphasized that early-stage entrepreneurs often need equity rather than debt. The World Bank is therefore planning centers where entrepreneurs can access equity, mentorship and early business support. “You cannot borrow your way to the first business you open,” he said.
Private capital and fragile markets
Banga said the World Bank Group mobilized $112 billion in private capital last year, more than three times the amount mobilized four years earlier. That funding was deployed alongside $120 billion from the institution’s own balance sheet, he said.
Private capital mobilization quadrupled in upper-middle-income countries and nearly tripled in lower-middle-income countries, while mobilization in Africa increased by two and a half times, according to the figures presented.
But Banga said the existing model has not sufficiently reached countries affected by fragility, conflict and violence. In those markets, MSMEs are not merely contributors to the economy but often represent the economy itself.
He called for an ecosystem-based approach combining fast-payment systems, stronger local banks and microfinance institutions, trusted digital aggregators and pooled first-loss facilities to reduce risks for private investors.
Entrepreneur describes barriers facing women in technology
The event also featured Gökçe Duman, co-founder of Türkiye-based conversational artificial intelligence company Ingosa.
Duman described the difficulties of launching a technology business in an emerging market, particularly as a woman entrepreneur.
She said only 2% of global capital goes to all-female founding teams, while women account for just 15% of decision-makers. She also cited estimates that as many as 70% of SMEs in developing regions are excluded from financing.
Duman said Ingosa developed conversational banner technology for advertising and research but struggled to secure a government grant because it needed a bank guarantee. Banks rejected the company because it lacked traditional collateral such as property.
The company eventually received support from Garanti BBVA. It later became a technology partner and supplier to the bank, producing conversational advertising campaigns.
Duman said Ingosa grew from two employees to 10 within a year and secured clients including Unilever, Ford and Garanti BBVA.
She also announced that the company had closed a new funding round with FutureBright Ventures and developed InsightMate, a digital research tool already being used by financial institutions in Türkiye and Azerbaijan.
“Entrepreneurs shouldn’t have to be superheroes to get one line of credit,” Duman said. “Superheroes don’t scale; systems do.”
India’s digital infrastructure offers a model
During the panel discussion, India’s Chief Economic Adviser V. Anantha Nageswaran identified three elements of India’s digital finance infrastructure that have helped expand MSME access to credit.
The first was the Goods and Services Tax, which encouraged informal businesses to formalize because larger buyers increasingly required tax registration.
The second was the Unified Payments Interface, or UPI, which creates digital payment histories for even the smallest vendors. Those records can help banks and fintechs assess cash flow and repayment capacity.
The third was India’s account-aggregator system, which allows customers to authorize the secure transfer of financial information between institutions.
Nageswaran said this reduces paperwork and enables lenders to assess borrowers using a broader set of data.
He identified three remaining obstacles: delayed payments from large buyers, excessive regulation and a lack of management training for small-business owners.
Receiving payments on time, he said, would ease many MSMEs’ financing pressures. He also called for better training in cash-flow management, working capital, hiring and human-resources practices.
Fintech lending shows strong growth effects
David Arana, chief executive of Mexican fintech Konfío, said 84% of the company’s borrowers had sought their first business loan through its platform.
Using digital sales and e-invoicing data, Konfío has been able to lend to companies that traditional banks might previously have considered invisible or too risky, he said.
Arana cited research conducted with IDB Invest showing that businesses using Konfío grew by an average of 19.4% over roughly 18 months to two years. For women-led businesses, the growth rate rose to 42%.
The findings, he said, suggest that MSME lending should be viewed not only as a financial-inclusion tool but also as a driver of economic development.
Banks and fintechs urged to collaborate
Kattiya Indaravijaya, chief executive of Thailand’s KASIKORNBANK, said digital channels and QR payments were creating financial histories for millions of MSMEs.
However, she noted that many small businesses still mix personal and business transactions, while a significant share of economic activity remains cash-based. She called for broader data ecosystems and closer cooperation with fintech companies.
Indaravijaya said her bank’s joint venture with LINE Financial Asia, known as KLINE, had become profitable. Banks, she argued, should combine their trust, liquidity and regulatory licenses with fintechs’ speed, innovation and alternative data.
Chris Wehbe, chief executive of Lendable, said institutional investors still lack a clear investment category for emerging-market MSME loans. He described the sector as a “triple niche” involving small businesses, fintechs and emerging markets.
To attract institutional capital, he said lenders need reliable and comparable data, stronger verification systems and structures that separate loan-portfolio risk from the financial health of individual fintech originators.
Securitization, bankruptcy-remote structures, control over collection accounts and backup servicing could help make MSME loans more acceptable to mainstream investors, he said. Blended finance and first-loss protection would also be needed during the early stages.
Grab highlights the value of platform data
Kell Jay Lim, Grab’s head of financial services, said the company supports merchants, drivers and delivery partners through expanded market reach, cashless payments and financing.
Grab processes approximately 15 million transactions a day and collects around 500 terabytes of raw data daily, Lim said. That information can help the company assess the performance and repayment capacity of small merchants.
He said women and people with disabilities borrowing through Grab had shown higher repayment rates in the company’s experience.
Lim called for wider data sharing through open banking, open finance and credit bureaus.
He also supported risk-sharing mechanisms such as partial guarantees and first-loss facilities, noting that World Bank subsidiary IFC support had helped Grab’s digital bank in Malaysia aim to reach 10,000 additional businesses.
Calls for regulatory reform and cross- border standards
John W. H. Denton, secretary general of the International Chamber of Commerce, warned that inconsistent regulations were creating “digital islands” that prevent MSMEs from trading efficiently across borders.
He called for mutual recognition and greater harmonization of digital trade rules, while stressing that digital sovereignty should not mean closing borders.
Denton urged governments to adopt legislation recognizing electronic transferable records, including electronic bills of lading. The ICC has developed a Model Law on Electronic Transferable Records, but he said political commitments must be translated into national laws.
He also cited ICC data showing a trade-finance default rate of just 0.24%, arguing that existing risk-weighting rules fail to reflect the actual performance of many MSME loans.
Panelists repeatedly called for a reassessment of macroprudential rules that make small-business lending uneconomical for regulated financial institutions.
Lendable, Wehbe said, has data on nearly 250 million individual loans across its global database, with more than a decade of consistently low loss rates.
A system built around shared data and shared risk
The discussion concluded with a broad call for greater data access, risk sharing and cooperation between banks, fintechs, governments, development institutions and digital platforms.
Speakers urged policymakers to:
Improve data-sharing systems while protecting privacy. Expand open banking, open finance and credit-bureau infrastructure. Make digital payments interoperable across borders. Provide guarantees and first-loss capital to attract private investors.
Reform risk-weighting rules for MSME lending. Simplify licensing, compliance and insolvency procedures. Ensure large buyers pay small suppliers on time. Recognize electronic trade documents legally. Provide entrepreneurs with management training and early-stage equity.
The event’s central message was that digital data can help replace the physical collateral many small businesses lack. But speakers stressed that data alone will not close the financing gap.
The World Bank’s strategy depends on building the wider systems around it: reliable digital infrastructure, supportive regulation, stronger local financial institutions, cross-border standards and partnerships that allow public and private capital to share risk.
If those conditions are met, Banga said, millions of businesses currently excluded from formal finance could gain access to capital and create the jobs needed by the next generation.
