Zvilo, a London-headquartered digital lending platform founded in 2019, has signed a Memorandum of Understanding (MoU) with American payments giant Mastercard 'to revolutionize Small and Medium-sized Enterprise (SME) lending in the Balkans'.

In a statement on Wednesday, the  start-up  said the collaboration will support its plans to transform the banking sector in the Balkans “by enabling access to short-term working capital across different value chains.”

“The partnership will focus on generating digital financial products within the trade sector, reducing barriers for SMEs wanting to access working capital,” Zvilo said.

At a future date, both companies will work together to launch a digital wallet for SMEs. The wallet will be equipped with savings,  payments  and other functionalities, Zvilo noted.

The startup’s partnership follows its recent signing of a debt facility of up to €50m with a London-based alternative asset management company to enable Zvilo to scale its SME lending program in the Balkans.

With the new MoU with Mastercard, Zvilo said both companies will create products for the region’s consumer base.

“One key metric is to reduce the number of unbanked people in the Balkans, almost 40%, by providing the necessary digital financial tools for the market and savings of up to 85%,” it added.

Reacting to the news, Admir Imani, the Chairman of Zvilo, who described the Balkans as “an often-overlooked market,” expressed excitement at the collaboration.

“We will be working with Mastercard to help transform how businesses in the region can access working capital and provide liquidity, reducing complexity and risk,” Imani added.

The State of SME Lending in the Balkans

According to Zvilo, access to finance for small and medium businesses in the South-East European region deteriorated during the COVID-19 pandemic.

In addition, the company believes that the anticipation of a future recession across the global market has further impeded any opportunity for lenders to finance SMEs at a pre-covid level.

According to the SME Policy Index published by the Organisation for Economic Co-operation and Development (OECD), the European Training Foundation, the European Union and the European Bank for Reconstruction and Development SMEs comprise over 99% of total enterprises in the Balkans and are the backbone of local Balkan economies.

Of this, the Index reports that between 30 and 50% of SMEs operate within the trade sector, an industry that has significant amounts of cash locked up in working capital.

On the other hand, the World Bank Enterprise Surveys found that an average of 39% of companies in the Balkans are currently using term loan financing for their working capital.

However, due to the difficulty of obtaining debt, term loans have only been able to cover around 13% of working capital needs for businesses. Therefore, there is significant demand for debt financing, with an average of 41% of businesses needing loans.

However, because roughly 75% of loans require considerable collateral, access to finance is limited in the region, the Survey also found. Finance is particularly inaccessible to SMEs because lenders are requesting collateral that has almost 200% ( on average) of the value of the loans they require.

Zvilo believes its partnership with Mastercard gives it an upper hand to change this situation.

The digital platform recently launched a Supply Chain Finance programme in Kosovo to enable SMEs to access funding without the need for any collateral.

“With the program well underway, Zvilo is also in the final stages of optimising its innovative Supply Chain Finance platform with an artificial intelligence engine,” Zvilo added.

Meanwhile, Mastercard has recently been expanding its list of partners by adding prominent Buy Now Pay Later (BNPL) brands to make BNPL features available to its millions of customers and merchants around the world.

Moreover, the American payments giant is the power behind the recently launched Nexo Card designed for select European markets by the cryptocurrency loan platform, Nexo, as its first crypto-backed card.

In a major effort to boost the digital economy, Mastercard recently formed a partnership with Massmart to connect small, medium and micro-enterprises for efficient digital commerce solutions.

Zvilo, a London-headquartered digital lending platform founded in 2019, has signed a Memorandum of Understanding (MoU) with American payments giant Mastercard 'to revolutionize Small and Medium-sized Enterprise (SME) lending in the Balkans'.

In a statement on Wednesday, the  start-up  said the collaboration will support its plans to transform the banking sector in the Balkans “by enabling access to short-term working capital across different value chains.”

“The partnership will focus on generating digital financial products within the trade sector, reducing barriers for SMEs wanting to access working capital,” Zvilo said.

At a future date, both companies will work together to launch a digital wallet for SMEs. The wallet will be equipped with savings,  payments  and other functionalities, Zvilo noted.

The startup’s partnership follows its recent signing of a debt facility of up to €50m with a London-based alternative asset management company to enable Zvilo to scale its SME lending program in the Balkans.

With the new MoU with Mastercard, Zvilo said both companies will create products for the region’s consumer base.

“One key metric is to reduce the number of unbanked people in the Balkans, almost 40%, by providing the necessary digital financial tools for the market and savings of up to 85%,” it added.

Reacting to the news, Admir Imani, the Chairman of Zvilo, who described the Balkans as “an often-overlooked market,” expressed excitement at the collaboration.

“We will be working with Mastercard to help transform how businesses in the region can access working capital and provide liquidity, reducing complexity and risk,” Imani added.

The State of SME Lending in the Balkans

According to Zvilo, access to finance for small and medium businesses in the South-East European region deteriorated during the COVID-19 pandemic.

In addition, the company believes that the anticipation of a future recession across the global market has further impeded any opportunity for lenders to finance SMEs at a pre-covid level.

According to the SME Policy Index published by the Organisation for Economic Co-operation and Development (OECD), the European Training Foundation, the European Union and the European Bank for Reconstruction and Development SMEs comprise over 99% of total enterprises in the Balkans and are the backbone of local Balkan economies.

Of this, the Index reports that between 30 and 50% of SMEs operate within the trade sector, an industry that has significant amounts of cash locked up in working capital.

On the other hand, the World Bank Enterprise Surveys found that an average of 39% of companies in the Balkans are currently using term loan financing for their working capital.

However, due to the difficulty of obtaining debt, term loans have only been able to cover around 13% of working capital needs for businesses. Therefore, there is significant demand for debt financing, with an average of 41% of businesses needing loans.

However, because roughly 75% of loans require considerable collateral, access to finance is limited in the region, the Survey also found. Finance is particularly inaccessible to SMEs because lenders are requesting collateral that has almost 200% ( on average) of the value of the loans they require.

Zvilo believes its partnership with Mastercard gives it an upper hand to change this situation.

The digital platform recently launched a Supply Chain Finance programme in Kosovo to enable SMEs to access funding without the need for any collateral.

“With the program well underway, Zvilo is also in the final stages of optimising its innovative Supply Chain Finance platform with an artificial intelligence engine,” Zvilo added.

Meanwhile, Mastercard has recently been expanding its list of partners by adding prominent Buy Now Pay Later (BNPL) brands to make BNPL features available to its millions of customers and merchants around the world.

Moreover, the American payments giant is the power behind the recently launched Nexo Card designed for select European markets by the cryptocurrency loan platform, Nexo, as its first crypto-backed card.

In a major effort to boost the digital economy, Mastercard recently formed a partnership with Massmart to connect small, medium and micro-enterprises for efficient digital commerce solutions.