A Blockchain-based Decentralized Peer-to-Peer Lending Framework for SMEs

Abstract

The International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal micro, small, and medium enterprises in developing countries, have an unmet financing need of $5.2 trillion annually, equivalent to 1.4 times the current level of global MSME lending. Current lending institutions and mechanisms have proven inadequate in filling this credit gap. Blockchain technology promises to replace intermediaries and enable peer-to-peer transactions using decentralized ledgers and smart contracts. In this study, we propose a Blockchain-based decentralized peer-to-peer lending framework for SMEs using Ethereum. We implement the solution using Solidity and simulate the Ethereum blockchain using Ganache. Blockchain-based decentralized peer-to-peer lending can make the SME lending process more transparent and efficient by ensuring information transparency. The decentralization and automation of the lending process can reduce the time and cost of SME lending, making it more accessible and affordable for SMEs to obtain credit.