Financial inclusion of small firms: informality, fintech solutions, and voids

This chapter analyses the relationship between institutional voids, the informality of small firms, and their financial inclusion in Colombia. Data for the analysis were obtained from a dataset available at DANE, which includes a sample of 86,969 small firms in Colombia and 2,467 in the Bogotá region. Descriptive analyses and a tree decision classification were conducted to obtain segments of entrepreneurs in the financial market, predict the formality of small firms, and analyse voids related to digital skills that might limit the solutions based on fintech. Results indicated that entrepreneurs less willing to demand credits represent the current largest segment, that formality and financial inclusion of small firms go hand in hand, and that digital skills might be a limitation for the extension of solutions based on fintech. The analyses allowed for identifying problems and solutions before conducting qualitative analyses with entrepreneurs.