How Do MSMEs Overcome Trust Issues with Banks – This Indonesian Startup is Providing Solutions with Blockchain
Micro, small and medium-sized enterprises (MSMEs) frequently face a number of challenges and obstacles during their growth, particularly during the early development stages. Since MSMEs are a major force in global innovation and business industry growth, it is important that they get the necessary support and backing in order to reach their full potential. Enter Tokoin, a Singapore-based Indonesian cryptocurrency startup, which is utilizing blockchain technology in order to help these MSMEs accelerate their growth and thrive in emerging markets.
According to the International Council for Small Business (ICSB), over 90% of all firms and companies are MSMEs and they account for 60% to 70% of total employment and 50% of GDP. MSMEs play an important role in driving technological innovation and industrial growth due to tight competition and the fast-paced advancements happening in the world today. Even so, most MSMEs face an uphill battle when they want to expand or grow, namely limited access to finance. This is exacerbated further by their inability to benefit from economies of scale, absence of reputation and limited access to data and information that is available to larger players.
For MSMEs, the main reason for their lack of financing is due to issues of trust, or rather the lack of it. A common problem is that financial institutions do not have a clear picture of the trustworthiness and credibility of the MSMEs, and hence are reluctant to lend or provide funds. Suppliers, too, also have doubts about the MSMEs’ ability to perform, and the lack of trust extends to potential customers as well.
The Indonesian startup Tokoin plans to change all that. It foresaw how blockchain technology can be utilized to help MSMEs establish a digital business ID that acts as an acceptable credibility scoring for financial institutions and suppliers alike. This is possible due to blockchain’s distributed and decentralized nature, which enables transactions and data to be recorded and shared across a distributed ledger network whereby every user can validate and access a tamper-proof copy of the ledger.
To address the issues of trust faced by MSMEs, Tokoin has introduced a comprehensive platform whereby MSMEs can establish a trusted, tamper-proof digital business identity that represents a valid reputation for credibility purposes. The startup will also accommodate MSMEs to utilize their data for creating more funding opportunities. Tokoin’s aim is to utilize the digital business identity for building business credit scoring that complies with the regulations and standards for applying business loans. Every transaction that is conducted on the platform by MSMEs will be stored as a credibility record to be used as a mortgage in the near future. By using blockchain, Tokoin is also able to implement encryption that enables the platform to transact in a very secure fashion as well.
Some other benefits for MSMEs that use the Tokoin platform include easy access to funding applications, the ability to get lower prices through aggregated buying, and earning points from making transactions that can be redeemed for discounts or services.
The blockchain startup has also formed several partnerships and alliances with entities all over the world in order to better improve the conditions for MSMEs to grow and thrive. They have allied with South Korean blockchain consulting firm Blockcrafters to create global strategies for business growth, and earlier this year they inked a partnership deal with Singapore-based XSQ Blockchain Infrastructure and Investments with the aim of facilitating the use and application of blockchain technology in the areas of business and industry.
Tokoin, the blockchain startup, has a clear mission of helping MSMEs by lowering financial inclusion barriers through reputation scoring, and providing a sustainable business model that enables MSMEs to perform at a higher scale. Blockchain is an integral part of that, and its adoption and use by Tokoin has opened up new opportunities and avenues for growing MSMEs everywhere to explore.