For every dollar provided by UNDP for the development of a lending platform for MSMEs, five dollars have been invested

August 8, 2023

A beneficiary of the “Zero-interest loans” programme is Carolina Jizdan, the administrator of iPadel LLC and co-founder of the Padel Federation of Moldova

Micro, small and medium enterprises (MSMEs) are the backbone of the Republic of Moldova’s economy. They make up 98% of all companies and provide six out of ten jobs in the country. Although bank loans are an MSME’s first option, there are alternative financing tools. 

Such a tool is offered by the Fagura platform, developed by a Moldovan start-up of the same name. In 2021, Fagura was provided with a grant of US$34,050 from UNDP Moldova to develop a module for MSMEs to request financial loans. The grant was awarded following an innovation competition, held through UNDP’s programme “Accelerating digital transformation in the public sector of the Republic of Moldova”.

Fagura made the process of submitting applications for financial loans much faster. “When you arrive at the doorstep of a financial institution, there is a long list of documents, well-defined financial data, and collateral in the form of real estate or at least movable property that is usually required, which takes time and effort for entrepreneurs, but the module that we created for MSMEs is fully automated and applying does not take more than 15 minutes,” says Inga Snegur, Sales and Development Specialist at Fagura. 

Applicants need to create a new account, fill out essential information like the name and surname of the administrator, IDNO and contact data, and then validate the account. They can then fill out the actual application for a loan. The application will request data about their business venture and how fast the requested resources will be spent and recovered. Fagura will then process the information provided using both human and AI-driven systems. 

Similarly, the loan management process driven by investors and Fagura itself was automated and digitized. This was possible thanks to the support of other development partners, such as USAID, Sweden and the European Fund for Southeast Europe.

The Fagura platform is connected with three databases that provide essential information for making credit decisions: InfoDebit (credit history, natural persons’ salaries), eGov (registry of natural persons), and ViaScope (financial data of the company). Based on the data provided, the platform works out how the associated risk of the investment.

Fagura launched the programme “Zero-interest loans” to promote the platform and attract applicants. The first 50 eligible companies that applied for a loan benefited from interest compensation.

Among them is Liuda Grîu’s venture, L.G. DOLCERIA LLC. Liuda borrowed €5,000 to procure professional chocolate made in Europe to continue delighting her customers with French macarons.

“I was able to apply for the loan digitally, I needed a minimal package of documents, and the key factor was the 0% loan rate. No documents were needed to apply first. And after they decided to grant me the loan, I presented only a few documents confirming the use of the loan and the payment confirmation. The platform is 100% digital and easy to use, and besides the fact that you can borrow, you can also invest,” explains Liuda Grîu, entrepreneur and baker.

Another beneficiary of the “Zero-interest loans” programme is Carolina Jizdan, the administrator of iPadel LLC and co-founder of the Padel Federation of Moldova. She requested a loan of €5,000 to purchase the first padel court in Moldova.

“We have just installed the first padel court in Chișinău and are offering the best services to our customers. To purchase the tent, I applied for a loan from Fagura, and the consultants kindly assisted me, conveniently, without waiting, without standing in line like at the bank,” says the entrepreneur.

Fagura's business model is financed by the platform's peer-to-peer investors–individual persons residing in the Republic of Moldova and abroad.

In June 2023, Fagura’s platform was awarded the “Impact Initiative of the Year” prize at the Moldova Innovation Awards 2023, offered by Moldova Innovation Technology Park, It was commended for its innovative model, sustainability and scaling potential.

“Alternative financing methods can offer MSMEs in the Republic of Moldova unique solutions adapted to specific needs and circumstances, coming with flexibility and customized terms. MSMEs, especially in the most dynamic sectors of the economy, looking to grow or expand their business, often require capital beyond what traditional lenders are willing to provide. This is why Moldovan MSMEs must diversify their funding sources,” says Serghei Botezatu, Project Manager, UNDP Moldova.

Despite the reluctance to lend to SMEs, and despite founders' knowledge of alternative financing options, banks are still the first organization entrepreneurs turn to when they need cash flow or capital. UNDP’s study on financing instruments for MSMEs shows that the newer and more complex a financing instrument is, the less tempted MSME founders and managers are to use it.

Alternative solutions, such as private equity, angel investors, and crowdfunding, just like Fagura itself, have not yet become sufficiently popular. Small entrepreneurs need financing, but they also need information on alternative financing tools and options. UNDP’s study comes with a series of recommendations for improving access to financing, including making alternative financing methods more popular.