How Indonesian Startup Uses Blockchain Technology To Save 240 Million MSMEs Globally

The Lingering Problems of the MSME Sector Have Been Overlooked for Too Long. One of the Indonesian Blockchain Startups, Tokoin, Found a Solution to This Crisis and It Is Not Alone in Its Movement.

Micro, medium, and small enterprises… What comes to the mind of an average person when he or she hears these words?

Some might say that this is just a part of companies that make up the global business industry. Others, after hearing the words “micro” and “small”, might claim that these companies do not have much influence on the worldwide economy. Yet, both of them are wrong.

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Persisting Obstacles of the MSME Industry

In reality, Micro, Medium and Small Enterprises (MSMEs) are the lifeline of the global economy. According to the United Nations:

“According to the data provided by the International Council for Small Business (ICSB), formal and informal Micro, Small and Medium-sized Enterprises (MSMEs) make up over 90% of all firms and account on average for 60-70% of total employment and 50% of GDP.”

Supporting this view, the report named “MSME Country Indicators 2014” by Erick Gonzales, Martin Hommes, and Melina Laura Mirmulstein states that there are 239.8 million MSMEs in the world, including formal and informal companies.

Thanks to their constant need to advance and develop to keep up with the competition, MSMEs are the key drivers of global innovation and business industry growth.

Regardless of their evident global importance, these companies are constantly facing obstacles, especially in their early development stages.

The main pain point for these growing firms is limited access to finance. The situation is further aggravated by the inability to benefit from economies of scale, shortage of access to valuable information that is shared among larger players and the absence of reputation. As a result, medium and small enterprises are often lacking behind the competition.

Considering the importance of MSMEs’ contribution to global economic growth and job creation, this class of businesses certainly deserves increased support from the public.

Nonetheless, despite numerous efforts coming from different layers of the community, MSMEs’ issues have lingered for dozens of years, suppressing the growth of this vital part of the economy.

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Blockchain to Solve MSME Sector’s Deep-Rooted Issues

In the case with MSMEs, the root of the sector’s problems lies in the lack of trust. Banks feel hesitant to provide funds, suppliers have doubts about MSMEs, and, as a result, customers do not trust these companies.

Blockchain technology is what will enable small and medium firms to build up their authority and get access to the necessary services. The inimitable features of blockchain allow it to give power to the users via the distributed ledger technology. This particular technology aids in recording transactions and sharing them across the ecosystem, which enables every user to validate and have a tamper-proof copy of the ledger.

To address the key challenges of micro, small and medium enterprises, Tokoin has introduced a platform that enables these companies to establish their business identity. By building up their business ID, MSMEs can enjoy the benefits of credibility scoring, as they keep a record of their business operations in a digital ledger.

As part of the solution, Tokoin aims to provide MSMEs with an opportunity to leverage the shared data to be able to get access to the much-needed funds from the banks and other financial institutions. Aside from that, Tokoin’s mission is to encourage business relationships between MSMEs through sharing their credit scoring with other participants of Tokoin’s ecosystem.

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