How can stablecoins transform SMEs in developing economies?

Small businesses in developing countries face many financial challenges that stablecoins can address. DLTPAY, a Web3 payment and DeFi platform, offers a unified solution to access stablecoin operations and other Web3 services.

Small and medium enterprises (SMEs) serve as the backbone of global economic development, comprising 90% of all businesses and accounting for 50% of worldwide employment, according to the World Bank. Their contributions span the gross domestic product (GDP) of developing and developed countries, but emerging economies depend even more on them.

Overcoming financial barriers for emerging economies

In Sub-Saharan Africa, a region home to 44 million SMEs, these enterprises sustain 80% of the populace, fueling economic growth and development. In Kenya, the small business sector makes up 98% of the economy, employing 80% of the workforce and contributing nearly 30% to the GDP.

However, many SMEs cannot thrive and expand without accessing the global financial system. In fact, 80% of businesses in Africa fail within five years, according to a 2022 Nigeria MSME report by Kippa. “Harsh economic environments, lack of access to capital, and poor business practices have stunted the growth and transition of micro-businesses,” the report reads.

The quick access to the United States dollar-based global financial system would open many doors, but opening a USD or euro account is challenging for businesses in Africa, South Asia, Latin America and other emerging economies.

Many developing countries impose strict forex controls, limiting businesses’ ability to hold foreign currency accounts at home. This makes it difficult for SMEs to participate in global trade, where USD is often preferred due to its status as a world reserve currency, being involved in about 90% of all forex transactions, according to the Bank for International Settlements (BIS). Such countries include Argentina, Venezuela, Nigeria, India and Egypt.

On top of that, the comprehensive banking infrastructure doesn’t favor SMEs in emerging economies. Transacting in USD usually involves intermediaries, such as correspondent banks, which means higher fees, unfavorable exchange rates and extended settlement times, ultimately impacting SMEs’ thin profit margins.

Many businesses don’t even have access to this unfavorable banking infrastructure, being economically isolated.

How blockchain and stablecoins can change the game for SMEs

Blockchain technology has been around for more than a decade, and it has already proved its ability to transform businesses in any industry. One of the most critical blockchain-based innovations is stablecoins, digital tokens pegged to fiat currencies, such as the U.S. dollar.

Thanks to stablecoins, like USD Coin (USDC) and Tether (USDT), SMEs can easily access the financial system while benefiting from the unique features of blockchain tech. On top of that, businesses can explore opportunities in decentralized finance (DeFi) to manage funds better and seek additional yield.

Stablecoins, whose aggregate market cap accounts for over 12% of the trillion-dollar crypto industry, can help SMEs in developing countries address many problems:

• Bypass forex restrictions –– Stablecoins can serve as an alternative to traditional forex systems, which can bypass many of the restrictions imposed by local governments. This grants immediate access to international trade without the complications of forex controls, enabling businesses to scale.
• Rapid and cost-effective transactions –– Public blockchains are borderless, enabling cross-border transactions without intermediaries, with higher efficiency and lower costs. SMEs can directly transact with overseas partners, reducing costs and settlement times.
• Financial inclusion –– SMEs operating in isolated economies can easily do business using stablecoins. Simply having a smartphone and internet connection can do the trick. Companies can engage in global trade, receive payments, and manage their finances on the blockchain.
• Transparency –– Public blockchains represent immutable ledgers that offer the highest possible level of transparency, recording all transactions securely on a verifiable database. This reduces the risk of fraud and improves the tracking of funds.
• Flexible liquidity options –– SMEs can leverage DeFi opportunities to lend or borrow against their crypto holdings, enjoying more flexibility in managing capital needs.

This platform helps SMEs access Web3 payments and DeFi

While stablecoins and DeFi provide many opportunities, the blockchain world may be challenging for SMEs due to fragmentation and innovative concepts. DLTPAY, a Web3 payment and DeFi platform, offers a unified solution to simplify onboarding and speed up the adoption of blockchain-based services.

DLTPAY offers stablecoin-based payments and other operations built on the Ethereum Virtual Machine layer-2 ecosystem, tailored for SMEs and enterprises. The platform includes features such as stablecoin payments, payroll, invoicing, cross-chain swaps, staking and analytics. It supports all major stablecoins, including USDT, USDC, Binance USD (BUSD) and Pax Dollar (USDP).

Source: DLTPAY

The platform also acts as a DeFi aggregator, helping businesses access financial services built on decentralized infrastructures.

Additionally, DLTPAY offers a stablecoin-first interface through its platform to conduct business, issue invoices payable in stablecoins, and swap stablecoins across different chains. CEO Kenneth Kumor explained:

“Emerging regions like Southeast Asia and Africa can tap into unprecedented growth in commerce by leveraging the synergy of USD-denominated stablecoins and public blockchains.”

The project has been backed by leading accelerator Techstars and is part of the Cointelegraph Startup program and Chainlink BUILD program.

Thanks to its easy-to-use solution aimed at enterprises, small and medium-sized businesses across emerging economies can get out of isolation, having better opportunities to scale and thrive.