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In this episode, we revisited the topic of fintech in Asia by interviewing Sean Creehan, a senior analyst and our colleague here in the Country Analysis Unit. We talked with him about a recent paper he wrote on the how digital innovation can improve financing for small- and medium-sized enterprises (SMEs) in Asia.

Sean helped us understand why SMEs, despite their essential role, receive a disproportionately small share of credit from the financial system. We also unpacked the many ways in which new financial technologies and innovative business models can boost SME access to credit and enlarge the pie of economic growth in Asia. 

• In Asian economies, SMEs typically create at least 50% of new jobs and represent over 40% of GDP, yet receive less than 20% of total bank credit.
• The SME credit gap persists because providing financial services to SMEs often involves greater costs and higher risks than lending to larger customers.
• Emerging financial technology can support credit to small businesses by significantly lowering costs and through alternative data that improves banks’ ability to assess the risk and credit profile of smaller borrowers.
• New fintech applications like blockchain have the potential to improve efficiency in trade finance transactions and integrate more Asian SMEs into the global supply chain.
• The increased standardization of commerce on digital platforms in Asia will help SMEs broaden their economic impact by gaining access to more liquidity and investment capital.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.