E‐Finance for Development: Global Trends, National Experience and SMEs

Abstract

IntroductionThe title of this chapter accurately reflects its content: it covers current developments in efinance with the initial emphasis being on overall global trends. The second half of the chapter is an exploration of how these developments are likely to impact SMEs in developing countries in the near future. There is a thorough coverage of relevant e-finance topics including: Internet banking; Internet payments; international electronic trade and finance systems; online credit information and credit insurance systems; private equity mobilisation and microfinance initiatives. The chapter is clearly explained and well written, and gives a good introduction to the e-finance issues relevant to SMEs, and in particular to those issues likely to be more relevant to SMEs in developing countries. The chapter has a wide-ranging global coverage and discusses issues impacting on both OECD and developing countries; there are many useful examples of e-finance initiatives in developing countries. The chapter is based on information made available at two UNCTAD e-finance related events held in 2001 and 2002 respectively.Finance is an information-intensive industry, which has the potential to alter greatly as a result of the Internet. The chapter adopts a narrow definition of e-finance as "financial services delivered online through Internet fixed and wireless networks to enterprises and households", though it also covers the off-line use of electronic devices fo r payment transactions in remote areas. E-finance includes Internet banking and payments, e-brokerage, e-insurance and other related services. Internet technologies are used in all aspects of the financial services industry, including retail and wholesale, back office and front office. In the near future the distinction between finance and e-fina nce will become less relevant as the core financial technology becomes Internet-based.The chapter identifies four lessons that have been learnt from the early phases of efinance adoption:

The ICT environment, financial sector and economic growth: a cross‐country analysis

“…In the era of information and communication technology, sunk costs are becoming less important partly because electronic delivery modes do not rely on branch networks (Claessens et al , 2002). Purcell and Toland (2003) state that banks and other agencies maintain credit information databases, which hold information on the financial performance of different companies and businesses. Companies in the developing countries, Serasa (www.serasa.com.br/ingles/i‐index.htm) in Brazil for instance, provides the largest credit information databank on institutional and household borrowers in Latin America and all of its products and reports are available online.…”

ICT strategies for development: Implementing multichannel banking in Romania

“…The security risks are higher for this channel. Usually the implementation of Internet banking requires substantial investment from a bank, as well as a major restructuring of its internal information flows and procedures (Efinance, 2001b(Efinance, , 2003bPurcell & Toland, 2003). A simpler version of Internet banking services has been introduced by a few banks: Using only the e-mail facility, the client can obtain information or request simple transactions from its bank (e.g., Piraeus Bank).…”

“…11 (4) 343-362 (2005 Finance and banking are information-intensive industries, which can be positively transformed by the development of ICT. However, a 1999 World Bank (Purcell & Toland, 2003) survey reported the average on-line banking penetration for developing countries to be only 5%. The main challenges encountered by developing countries in implementing multichannel banking activities are (Hadidi, 2003) • The ability to adopt global technology to the local requirements • The ability to strengthen the public support for e-finance • The ability to create the necessary level of regulatory and institutional frameworks • The ability to mainstream SMEs toward e-finance.…”

ICT diffusion and financial development: Comparing high, middle, and low-income countries

“…In this respect, Allen et al [ 10 ] and Domowitz [ 11 ] argued that electronic finance technology overcomes information asymmetries between customers and producers and costs associated with data handling. Purcell and Toland [ 12 ] suggested that ICT plays a greater role in managing credit information data records and delivering debtors and institutional references. Shamim [ 13 ] and Majeed and Ayub [ 14 ] exhibited that ICT can support economic growth by decreasing operational and informational expenses.…”