Outputs:

1.  Stock take and survey exercise: As a first step, an exercise would be conducted to take stock of Fintech developments through desktop research, interviews, teleconferences and possibly surveys with key stakeholders, including Fintech players and SME associations. This fact-finding exercise would require a tailored approach with different questions asked to different stakeholders (with a different set of questions for Fintech start-ups, SME association and financial incumbents for instance). This exercise aims to be broad, covering all APEC economies or as many possible, with an emphasis on economies with a developed market and/or high potential. This would form the basis of an analytical report. A key aspect would be to shed light on the uptake of Fintech solutions by SMEs and entrepreneurs and how it benefits their expansion and business success. Special emphasis could be placed on women-owned ventures, pending data limitations. This study could be conducted in Q1 2020 and would constitute a necessary input for the following steps of the project. This exercise would not result in a separate output, but rather feed into the overall policy paper. This exercise will enable to further understanding of how fintech is affecting SMEs’ access the finance and what rationale and areas there are for policy makers to intervene. 

2.  Study and report: A related study would then provide a state of play regarding the regulatory approaches in APEC members, OECD economies and beyond for financial innovation related to SMEs and entrepreneurs. This would include both common practices and more innovative or emerging approaches. In addition, this report would map current initiatives to ease SMEs’ access to Fintech providers by development banks, development agencies, other government bodies and, to some extent, non-government actors. This would be conducted in close coordination with government officials from interested economies and jurisdictions. Special consideration would be placed on the impact these policies had. This study would look into a large number of jurisdictions, with an emphasis of economies with well-developed policies and/or a clear ambition in this area. This study could be conducted in Q1 2020 and would constitute a necessary input for the following steps of the project. This report would not constitute a separate publication, but would function as an introductory section of the overall policy paper, given the well understood importance of a solid regulatory and supervisory framework for the fintech industry. 

3.  Policy paper “Public Policy, Fintech and SMEs: Recommendations for Promoting a New Financing Ecosystem”: The first two steps allow for the formulation of lessons learned, a compilation of good policy practices and a set of recommendations. These could be shared in various formats with interested stakeholders, mainly to the related APEC working groups and steering groups, both online and offline. The purpose would be to guide policy makers interested in easing access to finance for SMEs and entrepreneurs, including for segments of the SME population that face particular challenges related to financial inclusion such as women-owned ventures or businesses located in rural and/or peripheral areas. This study could be conducted in Q2 2020. This policy paper would include the most salient insights from the above outputs. The main output would be a policy paper, mainly targeting interested policy makers with the purpose to provide guidance, hopefully allowing policy makers to learn from experiences across the globe on how to enable SMEs to benefit from Fintech and, more specifically, to adopt and adjust policy practices that have proved successful in other jurisdictions. The overall length, given the different sections, is estimated at 100 pages, with a summary of around two pages. 

4.  Conference: The project would be discussed and presented during a conference, most likely in the 51^st SME Working Group to be held in Malaysia 2020. This conference would represent an opportunity to share the main insights among policy makers, discuss policy experiences and thereby refine the key messages and policy recommendations of the project. It is envisioned to organize a full-day conference on the margins of the SMEWG. Part of the program would consist of sharing the main insights of the report, and another part on panels where policy makers and other stakeholders could discuss policy practices in more detail. The former part could possibly take place in the morning, and the latter part in the afternoon. This event would mainly target government officials from APEC economies, ideally working for an SME agency, development bank or a ministry that designs policies to ease SMEs’ access to finance. In the best case scenario, this would involve both senior officials, who can steer policy practices and introduce new programs as well as more junior staff with some experience in the area, who can implement the recommendations and work on the technical arrangements. 

Outcomes:

1.  The project aims to raise awareness of the benefits of Fintech for SMEs, in particular to increase their financial inclusion, for policy makers of APEC economies and beyond. Financial innovation is taking place at a very rapid pace and holds great opportunity for small businesses in need of external finance. A first outcome of this project would be to share this insight and raise the issue on the political agenda. 

2.  In a similar vein, an appropriate regulatory and supervisory framework is key for financial innovation to take place, while not harming financial stability and ensuring consumer and investor protection. An overview of current policy approaches - and their impact - would assist APEC economies (and other interested economies) to adopt a more suitable framework. On the measurement of impact, regulatory impact assessment are relatively common tools that critically assess the positive and negative effects of regulation. An overview of such assessments in this area would provide insights on key issues of policy frameworks that enable financial innovation to take place while mitigating the downward risks.

3.  Aside from getting the appropriate framework conditions in place, government bodies around the world are taking action to enable more small businesses benefit from financial innovation. Initiatives include raising awareness and understanding of the benefits and risks of Fintech solutions among (potential) beneficiaries, creating an environment in which experimentation in financial services within a controlled environment is possible, channeling support through and collaborating with entrants in financial services as well as through and with incumbents, the creation of innovation labs or accelerators for (Fintech) start-ups, the establishment or expansion of co-investment schemes (for example with Fintech-focused venture capital funds) and so on. The project endeavors to collect and disseminate good practices. A key objective would be the adoption and/or modification of existing policies of these good practices by APEC members over the long term. This could be monitored, with modest resources, through a limited survey exercise with key agencies after the completion of the report. The identification of good policy practices and effective approaches depends largely on (independent) evaluations of programs of its impact, dependent on how it achieved key performance indicators on the beneficiaries and the wider economy such as access to finance indicators (at the company and economy level), employment (at the company and economy level), profitability (at the company level), the growth of the fintech industry and so on (and dependent on the programs). 

4.  Finally, a key outcome would be the attendance and buy-in in the conference in Malaysia where the take-aways of the report will be discussed and shared. A possible performance indicator would be the number of participants from various APEC economies (and possibly beyond). 

Beneficiaries: The main beneficiaries of this project would be government officials, especially of SME agencies, development banks and other bodies responsible to ease SMEs’ access to finance. The project should be relevant for relatively high levels of seniority that have the decision power to initiate new programs and/or modify existing ones as well as to more junior staff, who are responsible for the implementation and operationalization of the programs.

More broadly and as secondary beneficiaries, the project is intended to be relevant for APEC working groups and steering groups related to financial inclusion for SMEs such as SMEWG and Economic Committee, and for a much wider group of stakeholder beyond; public agencies and policy makers supporting SMEs, such as the academic sector; Fintech Industry and SME representative bodies. The Finance Minister’s process aswell as the PPWE will also be consulted.

A preliminary version of the report will be shared with the above-mentioned stakeholders in order to generate discussion, requests for comments and contributions that will be taken into account for the development of a final report.

It is the ambition that the conference in Malaysia would include government officials active in promoting SME development in general and SME access to finance more precisely. The SME Working Group typically consists of officials working on SME and entrepreneurship development and should therefore be an appropriate audience. In addition, the SMEWG has a proven record of accomplishment of liaising with and informing policy experts at other parts of the government on specific topics. Finally, specific outreach efforts could be undertaken with the Malaysian authorities to invite specific officials (or from specific organizations) from APEC economies for the event.