Minding the gap: Evaluating SME financing in Latin America

Gregory Da Re, chief of the strategy and innovation division at the Inter-American Investment Corp., discusses the evolving landscape of SME financing in Latin America and the Caribbean.

Small and medium-sized enterprises play a vital role in driving economic growth in many countries, and the Latin America and Caribbean region is no exception. More than 90 percent of businesses in the region are classified as SMEs but a financing gap of nearly $250 billion exists to fund their activities.

The region’s multilateral lending institutions such as the Inter-American Development Bank and its private sector arm, the Inter-American Investment Corp., are addressing the shortfall, which the IDB ranks as the world’s largest after the Middle East and North Africa.

Yet traditional institutions are being increasingly pushed to brainstorm new ways to adapt to and capitalize on an evolving landscape of SME finance.

In a recent video interview Gregory Da Re, chief of strategy and innovation at the IIC, told Devex that emerging technologies and innovative business models, coupled with increased digital connectivity are transforming the financial sector in the region.

Financial technology companies — “Fintechs” — are breaking new ground, for example, in traditional services such as credit assessments. And direct lending sources such as crowdsourcing or peer-to-peer lending may well migrate to fund SMEs, challenging the way the IIC does business.

“We are actively looking at different platforms in the region to see if we can either be a part of it or support [them],” Da Re noted. “This is part of our development mission.”

It is still early days for determining how multilateral finance can team up with social innovations in finance. But as Da Re explained, a shift in thinking is underway.

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About the author

  • Naki B. Mendoza

    Naki is a former reporter, he covered the intersection of business and international development. Prior to Devex he was a Latin America reporter for Energy Intelligence covering corporate investments and political risks in the region’s energy sector. His previous assignments abroad have posted him throughout Europe, South America, and Australia.