The problem: limited funding opportunities in the global south

Small and medium-sized enterprises (SMEs) generate 70% of jobs in emerging markets. Yet a lack of access to credit severely restricts their growth. While lenders in developed markets actively pursue yield, they’re often reluctant to engage in lending to businesses across the global south. Assessing the risk posed by these businesses is complex as they are small and usually seek modest loans. Instead, lending institutions prefer to channel funds into high-yield government debts, limiting prospects for the real economy’s expansion. This growth suppression leads to a staggering $5.2tn credit deficit for these SMEs.

Fintech as a solution to that lack of financial access

A new generation of financial technology (fintech) entities is emerging to fill this gap. Certain fintech firms are becoming adept at building tools for underwriting the risks of specific businesses or loan types, providing capital, and fostering inclusive economic growth, equality, and job creation. There are also fintech lenders that frequently finance SMEs with or without collateral, focusing on data to gauge the risk of the businesses they finance.

Yet, a significant bottleneck remains. Fintech companies desire access to balance sheet funding to finance their loan portfolios. However, their licenses do not let them accept deposits to fund these activities, leaving a gap that must be filled by wholesale lending. In the established global finance ecosystem, institutional investors bridge this gap by relying on trusted intermediaries, such as investment banks, to find deals and assess risks. RealFi develops tools that replace and consolidate these functions and enable global distribution through technology.

Enter RealFi: a suite of tools to better assess risk, facilitate connections, and manage risk

The relentless quest for yield has triggered a surge in demand for private credit, predominantly channelled into developed economies to support established corporations with multiple capital-raising avenues. Yet, emerging markets lack such investor confidence.

RealFi offers a suite of tools that help users demystify, build trust, and facilitate private credit opportunities in emerging markets.

RealFi provides data-driven tools that enable users to make capital accessible to millions of SMEs in these markets by making risk more transparent, quantifiable, and predictable.

The suite of tools includes:

• access to financial statements: critical in assessing the health of a fintech lender that creates a loan portfolio.
• loan tapes: a raw data export of every transaction between a fintech lender and their end-borrowers in near real-time, providing insights into current borrowing behaviour.
• dynamic financial model: a framework that enables users to stress test funding opportunities and better understand potential risks and rewards.

RealFi works with fintech lenders in emerging markets to improve and standardise their data. This improved data will be shared with users to increase transparency and provide insights, ultimately enhancing opportunities in these markets.

Through the loan tape, RealFi’s tools will help users monitor early warning signs of changes in repayment patterns and revise their risk model. This process helps users evaluate the value of an SME’s lending portfolio as analysts might predict a company’s quarterly earnings through satellite imagery of logistical activities.

By leveraging technology to scale this service across various fintech lenders, RealFi’s suite of tools boosts user confidence and allows users to address potential issues before they escalate. RealFi is more than just data though – it establishes a common risk and reward language that encourages users to engage in small-scale opportunities with a new group of counterparties.

Real-world assets in Web3

RealFi’s tools simplify the understanding of debt asset values and risks by offering automated features that allow users to monitor key performance indicators from diverse sources. The RealFi team views this capability as crucial, yet it is absent in most real-world asset protocols. Such tools help users alleviate risks like fraud, financial mismanagement, and asset underperformance.

RealFi’s tools help users monitor investments in emerging market debt assets using traditional financial instruments. However, the ultimate goal is to equip users with the tools they need to lend confidently and efficiently and promote SME growth in emerging markets.

RealFi’s impact: reviewing returns with social benefits

Impact claims should be as verifiable as loan repayments. After a fintech lender is onboarded, RealFi links measurable data points to global impact frameworks. Users can utilise RealFi’s tools to follow impact metrics and compare these against other opportunities as easily as they track returns.

RealFi’s impact is twofold: it unlocks opportunities for developing markets, and users can search for new opportunities in emerging markets with more transparency through data than has previously been available.