Do Innovations in Lending Help SMEs?

As new digital technologies emerge that make the provision of financial services more efficient, they hold the potential to address barriers that SMEs face in accessing credit. This paper found empirical evidence that crowdfunding for SMEs improved SMEs’ timeliness to pay debt in Singapore. Anecdotal evidence from growing SMEs suggests that getting crowdfunding loans also induced financing from banks, leading to more efficient allocation of credit. In just four years, Singapore’s crowdfunding volume has grown rapidly to make it the top crowdfunding hub in Southeast Asia in 2017. The rapid development of Singapore’s crowdfunding industry can be attributed to its higher GDP per capita, higher level of financial sector development and greater availability of venture capital. Our results suggest that policies do matter to the development of the crowdfunding industry and we identify some policy considerations at national level. The paper concludes with a discussion on implications of crowdfunding on banks’ business models and analysis of policy makers’ regulatory approach to crowdfunding.