We recently took stock of the G20 discussions on the financial inclusion of individuals.We highlighted the progress made in banking and the challenges that still lie ahead. Under Brazil’s presidency, the G20 Finance Track also guided the inclusion of micro and small enterprises – a crucial topic for economic development and one that has deserved the attention of the credit bureau sector for many years.
The document “Action Plan for Micro, Small and Medium Enterprise Financing” brings together the G20’s contributions on the topic of small business financing, highlighting policy indications to promote financial inclusion.
Challenges of Small Business Credit
Many small businesses are unaware of the possibilities that credit offers, such as working capital and business expansion. However, when they do, they face difficulties in obtaining credit due to the lack of financial reports and collateral. As they take fewer resources than larger companies and require greater effort in the risk assessment process, credit providers prefer to focus on large companies.
Innovations in Credit
In general, when small business owners turn to some source of external financing, the option is a bank loan. However, this is not the only possibility. Financial innovation is a solution to expand access to credit. Fintechs, for example, reduce transaction costs and apply data intelligence to improve credit analysis. This reduces the risk of operations and facilitates access to credit for small businesses. In addition, fintechs offer services such as sales management, issuance of slips, and anticipation of receivables in a single application.
The G20 report highlights another important innovation: the so-called “embedded finance”, which allows companies from different segments to integrate financial solutions with other services already provided. The advantage of this model is that these companies know their clients – individuals or companies – based on the commercial relationship they already have and the history of this relationship.
Proposals for Financial Inclusion
The G20 Action Plan proposes horizontal and vertical policies to improve financial inclusion. Horizontal measures include improving credit information systems, strengthening the collateral recovery system and measures to encourage competition. Going beyond the basics, the document proposes the development of the capital market to allow an alternative to financing through bank loans. Thus, a smaller company could raise capital without having to comply with all the requirements of a public offering of shares.
Vertical policies include the creation of credit lines by the government, offered by intermediary institutions or development banks and development agencies, and the creation of guarantee funds as a way to mitigate credit risk. The plan foresees a greater fiscal impact with these measures than the horizontal ones, so they must be transparent and constantly submitted to impact assessment.
If these themes sound familiar to the reader, it is because they have been present in the Brazilian debate over the last few years. Important horizontal measures have been implemented to modernize the country’s credit market. And, especially during the pandemic, targeted actions have also implemented. The effects are are starting to show up in the data: the proportion of the credit balance for MSMEs has grown again, according to data from the Brazilian Central Bank, reaching 45.7% in January 2025 – in July 2018, this proportion reached 34.4 per cent.
In general terms, this was the panorama prepared by the G20 Finance Track. The presence of this theme at the forum allows the sharing of experiences between countries and reveals the importance of the financial inclusion of small businesses for the country’s economic development projects.
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