The Financing Problem of Innovation and Entrepreneurship in Emerging Markets and Alternative Solutions

Abstract

Financial development is an essential part of economic development. Financing of entrepreneurship and innovations is critically important to establish the link between finance and growth. However, there are limitations in finding funds for entrepreneurs and innovations in emerging markets. Because in these countries, in general, there is a larger number of small firms that have a very high credit deficit and need capital resources. This article focuses on new methodologies for narrowing credit gap exposure in emerging markets. In this context, policy measures to improve the role of banks and availability of credits in the development process, microfinance as an alternative form of financing, financial technologies (FinTech) to address credit limitations in the traditional banking and crowdfunding as a new type of financial intermediation will be focused on. In addition, the role of external financing through private equity markets (venture capital and angel business angels) is dealt with.