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Alexandra Donnelly of C2FO: Fintech Professional Discusses the Significance of Working Capital for MSMEs

C2FO, a US-based global Fintech, is being recognized as a potential solution to the working capital problem faced by businesses in developing countries. In a recent policy paper presented at the G20 conference, C2FO’s platform was cited as a way to encourage economic growth and fund sustainability efforts in these countries.

According to Alexandra Donnelly, COO for the Americas at C2FO, the availability of working capital is crucial for smaller companies to continue growing and creating jobs, which can have a significant impact on the global economy. The World Bank estimates that an additional 600 million jobs need to be created by 2030 to support a decent standard of living and sustainability. With 84% of the world’s working-age population living in developing economies, business growth in these countries becomes essential.

Donnelly explains that working capital is the money businesses have available to fund their operations. If a business lacks cash or does not have access to additional funding, its existence may be at risk. This lack of capital can also prevent businesses from taking advantage of growth opportunities. In developing countries, approximately 40% of micro, small, and medium-sized enterprises (MSMEs) are unable to access the $5.2 trillion in working capital they need annually, according to the International Finance Corporation.

The current financial system, including supply chain finance (SCF), does not adequately support up-and-coming businesses with the funding they require. SCF has historically been limited to larger suppliers, leaving smaller businesses unable to participate. However, platforms like C2FO are democratizing access to SCF by automating processes and expanding funding sources, allowing suppliers of all sizes to tap into these programs. Nonetheless, the larger issue lies in the fact that the traditional financial system was not designed to serve small businesses, as lenders’ standards are often too strict.

Donnelly emphasizes that the traditional financial system still plays a crucial role in solving this problem. Banks and non-bank financial institutions are aware of the challenges facing smaller businesses and want to help. Collaboration between traditional players and platforms like C2FO is necessary to connect with MSMEs in need of funding.

C2FO’s Early Pay platform, one of its working capital solutions, has been at the heart of the company’s operations since its launch in 2008. Suppliers, who are typically smaller businesses, offer customized discounts to their buyers in exchange for early payment. This approach allows small businesses to improve their cash flow and meet operational expenses, as well as invest in new growth. The Early Pay platform has been effective in promoting inclusiveness, flexibility, and choice for suppliers, making it a potential model for solving the working capital problem.

C2FO’s approach is gaining global recognition, with countries like India adopting similar systems to help MSMEs finance or discount their invoices. By providing businesses with the working capital they need, these initiatives have the potential to create jobs and benefit people worldwide.

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