The role of fintech in mitigating information friction in supply chain finance

Arbeitspapier

Micro, small, and medium-sized enterprises in developing countries face severe financing difficulties, especially when trying to expand internationally. "Information friction" is a significant cause of this financing gap. Recent financial technologies (fintech) can improve supply chain finance efficiency. This paper therefore proposes a conceptual and analytical framework to study how fintech can close the financing gap by reducing information friction. We classify fintech into two categories: information processing technology (Type-A) and information collecting technology (Type-B) and find that both help close the financing gap by lowering the probability of misclassification of good firms as bad. Banks' optimal Type-A investment increases in the bank's size, profit margin, and the fraction of good firms in the market. They invest in Type-B if and only if the investment is sufficiently small. Due to "double marginalization," a bank's optimal fintech investment is lower than a socially optimal level, calling for mechanisms to incentivize or complement banks' investment in fintech.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ADB Economics Working Paper Series ; No. 599

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Industrialization; Manufacturing and Service Industries; Choice of Technology ; Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy ; Innovation and Invention: Processes and Incentives
• Thema: artificial intelligence ; digitization ; fintech ; information friction ; supply chain finance

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lee, Hsiao-Hui ; Yang, S. Alex ; Kim, Kijin
• Ereignis: Veröffentlichung
• (wer): Asian Development Bank (ADB)
• (wo): Manila
• (wann): 2019

Weitere Informationen

• DOI: doi:10.22617/WPS190574-2
• Handle: http://hdl.handle.net/10419/230355
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ