Project Dynamo: financing small and medium enterprises in the digital age

The BIS Innovation Hub's Hong Kong Centre and the Hong Kong Monetary Authority have launched Project Dynamo, which aims to deliver a prototype for the compliant use of decentralised finance (DeFi) tools, such as blockchain and smart contracts, to improve access to finance for unfunded and underfunded small and medium enterprises (SMEs). The intention is to enable policymakers and the financial services industry to develop a deeper understanding of whether and how these technologies can reduce transaction and borrowing costs, facilitate productive financing and promote financial inclusion.

SMEs are the lifeblood of most economies. According to recent World Bank research, they account for more than 90% of all businesses and contribute to more than 50% of employment globally. However, they traditionally face great difficulties in accessing financing, especially on affordable terms. The same research also estimates that about half of these companies have no access to formal credit. In developing countries alone, the segment has unmet financing needs of over $5.2 trillion dollars every year, equivalent to 1.4 times of the current level of global lending to SMEs. The Covid-19 pandemic has only exacerbated the situation, leaving millions of businesses on the brink of bankruptcy.

In addition to project Dynamo, the research will extend into related topics such as decentralised identifiers and the interoperability of digital payment methods such as stablecoins and central bank digital currencies. The use of artificial intelligence and big data to enhance SME credit risk assessment and innovative supply chain financing solutions are also of interest to us.

The BIS Innovation Hub is interested in hearing from companies with working solutions in these areas. 

Project Advisor: Lucy Wong (