The AI Book

CHAPTER 15The Power of AI to Transform the Global SME Credit Landscape

By Nadia Sood¹

¹CEO and Founder, , CreditEnable

Bill Gates once said that people always overestimate the effect of technology over two years, but completely underestimate its effect over ten. While it is doubtful that he was referring to SME lending, in few sectors could his comments have been more appropriate. Across the world, the introduction of AI into the SME lending space is producing improvements in the most dysfunctional credit market of all: the US$4.5 trillion gap between what creditworthy SMEs need to grow and the finance that banks and other finance providers want to extend to them but cannot, because it has been too difficult for the two parties to transact.

The global market for SME credit stands at a staggering $8.1 trillion.¹ In emerging and developed economies alike, roughly two thirds of the working population are employed by SMEs. Providing finance into this sector is critically important for GDP growth, yet historically it has been a slow, costly and difficult process for banks to underwrite these small companies.

That dynamic is now changing because of the introduction of AI. AI is being used across the spectrum of SME lending to solve data asymmetry problems, improve speed and reduce costs in underwriting, improve the robustness of decision-making and reduce risk. The innovation is coming from both FinTechs that are “leapfrogging” banks as well as from companies that are working with ...