Fintech in the Caribbean: Is it gaining momentum?
The Caribbean is a place like no other. It is diverse in every aspect we can imagine, including in business. In our region, Micro, Small, and Medium Enterprises (MSMEs) are an essential component of the economic ecosystem and, in some cases, they represent its backbone.
So much so that, according to the Organisation for Economic Co-operation and Development (OECD), they represent 99 percent of businesses in Latin America and the Caribbean and 67 percent of employment.
However, MSMEs do not have an easy path when trying to progress in the business world. According to a study that evaluated MSME’s in the Caribbean, only 48% of them have access to financial services and therefore have a limited ability to perform traditional business processes like managing cash flow and risks, etc.
At the same time, many of them cannot provide the kind of information that the traditional banking sector requires, and the diverse industries they are in do not support conventional business categorization. So the reality is that when facing these type of disadvantages, it becomes challenging for a company to grow or to keep track of their daily activities.
But the good news is that the financial ecosystem in the Caribbean is changing, and its evolution could ultimately help MSMEs.
Currently, Fintech or Financial technology is developing at an accelerating pace in the region, and its growth translates into new services for all. With this scenario, MSMEs and the population they are involved in are the first that can benefit. Fintech can be impactful when reducing costs, and it can foster financial inclusion. Indeed, some 46% of fintech startups in the region seek to help under-banked consumers and/or small and medium enterprises*.
At the same time, it can help MSMEs to succeed in a competitive financial sector, amplifying their options and helping them meet the requirements they need to enter the industry.
The rise of Fintech and, therefore, the expansion of digital financial services has developed mobile money services, which have opened an entirely new realm for MSMEs.
“There are many cases in the region that are in development and others that are consolidated. We have the example of MonCash in Haiti, where person-to-person payments have unleashed numerous possibilities for the population. So much so that today, it facilitates transactions that represented 11% of the country’s GDP,” revealed Diego Todeschini, General Manager of Global Payments for Digicel Financial Services.
Fintech companies are growing in a continually evolving region that does not necessarily have the infrastructure to support a traditional financial system. Therefore, they must invest their time in helping MSMEs gather the requirements they need to continue towards a path to success.
Fintech could help them gain financial stability, help with financial integrity, offer protection from cyber risk, and provide consumer and data protection*.
*Source: IMF Working Paper: Fintech in Latin America and the Caribbean: Stocktaking