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Promoting Financial Inclusion for Female-Managed SMEs Through Blockchain Technology – Modern Diplomacy

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Promoting Financial Inclusion for Female-Managed SMEs Through Blockchain Technology – Modern Diplomacy

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Authors: Tuhu Nugraha and Temmy Debora*

In the midst of the speedy digital period, blockchain expertise emerges as an innovation with the potential to revolutionize the worldwide monetary business. In Indonesia, SMEs managed by girls stand as one of many sectors that may reap vital advantages from this expertise. SMEs play an important position within the nationwide economic system, with over 64.2 million enterprise items contributing 61.9% to the GDP and using as much as 97% of the workforce.

However, many SMEs face challenges, starting from entry to financing to advertising and marketing points and productiveness. With the federal government’s monetary inclusion goal set at 90% for 2024, the position of SMEs, particularly these managed by girls (which account for 64.5% of all SMEs), turns into pivotal. Therefore, selling monetary inclusion for feminine entrepreneurs has a strategic impression in reaching this goal.

Here’s how blockchain could be a answer to boost monetary inclusion for feminine SME entrepreneurs in Indonesia:

Access to Financing

Based on information from the Ministry of Communication and Information, solely 20 million out of 64 million SMEs have accessed formal monetary establishments. One of the primary causes many SMEs, particularly these managed by girls, wrestle to entry formal monetary establishments is because of stringent necessities. Many SMEs lack formal paperwork like audited monetary statements, bodily collateral, or a great credit score historical past. Moreover, the prolonged and bureaucratic mortgage utility course of typically turns into a barrier for SMEs to acquire working capital.

Blockchain expertise gives a monetary inclusion answer for female-managed SMEs in Indonesia, typically hindered by strict necessities and prolonged processes in formal monetary establishments. With a blockchain-based lending platform, female-managed SMEs can entry financing with a less complicated, clear, and environment friendly course of. Direct interplay between lenders and debtors reduces transaction prices, whereas blockchain transparency enhances belief. Additionally, an alternate credit score evaluation mannequin based mostly on SME transaction information permits these with no formal credit score historical past to nonetheless acquire financing.

Low Transaction Costs

Transaction prices play a big position in SME operations. For many SMEs, particularly these transacting in small quantities, excessive transaction prices can considerably erode revenue margins. This turns into much more essential for female-managed SMEs who might need restricted preliminary capital and smaller operations in comparison with different SMEs.

Blockchain expertise gives an answer to cut back these transaction prices. With its decentralized nature, blockchain eliminates the necessity for intermediaries like banks or different monetary establishments. This implies that charges sometimes charged by intermediaries – reminiscent of administrative charges, switch charges, or different expenses – will be eradicated or drastically diminished.

When in comparison with the rates of interest at the moment borne by SMEs from mortgage sharks, the distinction turns into stark. Loan sharks sometimes provide loans with very high-interest charges, generally reaching 20% to 40% per thirty days. This is way increased in comparison with rates of interest from formal monetary establishments. With blockchain, female-managed SMEs cannot solely cut back transaction prices but in addition doubtlessly entry financing at decrease rates of interest via blockchain-based peer-to-peer lending platforms.

Thus, adopting blockchain expertise can present twin advantages for female-managed SMEs: lowering transaction prices and offering entry to cheaper financing, thereby enhancing their revenue margins and competitiveness out there.

Global Payments

In the midst of globalization, female-managed SMEs in Indonesia discover alternatives to penetrate worldwide markets. However, a disparity is clear: though SME exporters account for 77.28% or about 13,775 exporters, their contribution is simply 4.09% or 6.331 million USD of complete exports. In distinction, large-scale exporters, which solely account for 22.72% or 4,044 exporters, dominate with a contribution of 95.9% or 148.609.7 million USD, as acknowledged by the Director of Export Market Development of the Ministry of Trade in 2023. One of the primary challenges confronted by female-managed SMEs is cross-border transactions. Many of them discover it troublesome to entry worldwide fee platforms, reminiscent of PayPal, as a result of language limitations and sophisticated administrative necessities. High transaction charges and lengthy settlement occasions via typical banks add to their burden. As an answer, blockchain expertise and cryptocurrencies emerge, providing easier transactions, decrease charges, and better safety. With an interface that helps the Indonesian language and with out the necessity for a traditional checking account, female-managed SMEs now have a higher alternative to compete extra successfully on the worldwide stage.

Digital Identity

Female-managed SMEs, particularly in distant areas, typically face challenges in accessing monetary companies reminiscent of loans or insurance coverage. One of their primary obstacles is the shortage of formal identification paperwork, reminiscent of nationwide ID playing cards, household playing cards, or proof of land possession, sometimes required by banks or different monetary establishments. Without these paperwork, they’re typically marginalized from the formal monetary system. However, blockchain expertise gives an progressive answer to this downside. Imagine blockchain as a safe digital ledger, the place each piece of data entered can’t be altered or deleted. With this expertise, female-managed SMEs can have a “digital identity” registered on the blockchain. This identification can include primary data reminiscent of identify, handle, enterprise transaction historical past, and extra. Most importantly, this identification is safe and verified. By having a blockchain-based digital identification, female-managed SMEs in distant areas can reveal to monetary establishments that they’re legit and reliable enterprise entities. This makes it simpler for them to use for loans, open financial institution accounts, or entry different monetary companies that had been beforehand exhausting to achieve. In different phrases, blockchain supplies a possibility for female-managed SMEs to combine into the formal economic system, enhancing their enterprise development potential.

Blockchain supplies progressive options for female-managed SMEs in Indonesia, particularly in distant areas. There, they typically face varied challenges, from insufficient schooling, restricted capital, to a scarcity of supporting infrastructure. But why concentrate on female-managed SMEs? Because in lots of instances, these girls are the primary pillars of the household. They play an important position in efforts to interrupt the chain of poverty, hoping to supply higher schooling for future generations. With the assistance of blockchain expertise, monetary inclusion will be expanded, social disparities will be diminished, and alternatives for female-managed SMEs to enhance their households’ high quality of life change into even higher.

*Temmy Debora, CEO and Founder Nakama.id, & Web3 Trailblazer Indonesia

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