Small and medium-sized enterprises (SMEs) are crucial for the economic growth of Latin America and the Caribbean. Still, they face productivity challenges that limit their contribution to sustainable economic development.
To overcome these challenges in El Salvador, IDB Lab and IDB Invest have joined forces with Banco Cuscatlán to design and implement the “LET’S DIGITAL PYME” initiative, which promotes digital transformation in this sector.
This initiative aims to transform traditional support for SMEs into a holistic approach that encompasses financial and business-related non-financial needs.
With this effort, it was possible to strengthen Salvadoran small and medium-sized enterprises in digitalization, achieving significant results:
- 79% of SMEs increased their sales between 5% and 50% (according to interviews conducted with SMEs).
- 85% reduced their operating costs.
- Ten thousand small and micro-entrepreneurs used a digital financial education platform.
- More than 3,200 women entrepreneurs received financial training.
- They incorporated digital tools and financial and non-financial products into their operations.
- All SMEs are linked to the innovation ecosystem and interested in deepening digital business transformation.
This collaboration demonstrates the synergy between the IDB Group’s private windows. With a loan operation led by IDB Invest and a technical cooperation led by IDB Lab, Banco Cuscatlán’s digital factory developed digital products for SMEs.
In turn, an open innovation challenge was carried out to address four challenges facing SMEs in digital transformation. This call attracted more than 84 applications from Startups and Fintechs from all over Latin America under a sandbox dynamic.
The finalist Fintechs and Startups could pitch and present their innovation proposals to Banco Cuscatlán. The competitive process resulted in the selection of the startups Alfi from Peru, Expediente Azul from Mexico, and FINDEX from El Salvador to integrate their solutions into Banco Cuscatlán’s platform.
From this process, valuable tools emerged from the innovation ecosystem to address specific challenges of SME clients and non-clients of the institution. These were the solutions the linked Startups created:
- Expediente Azul implemented a digital document management solution that facilitates SMEs’ administrative process optimization and access to credit.
- Alfi, for its part, was selected to address the financial education challenge and has launched an AI-based platform offering interactive and entertaining educational content to strengthen the financial management of SME entrepreneurs and entrepreneurs.
- FINDEX with an integrated solution for the administrative-financial management of businesses and the generation of electronic invoices to deepen the digitalization of SMEs.
SMEs and the Economy
Banco Cuscatlán’s support for SMEs has so far mainly focused on providing access to financing, but LET’S DIGITAL PYME has shown how SMEs can benefit from access to services offered by a bank to improve their management, operational efficiency, and technology adoption.
An important conclusion is that banks and other financial service providers must expand their offerings to include non-financial services such as training programs, mentoring, digital marketing support, and resource management tools to strengthen their business capabilities.
Therefore, financial institutions in the region, as Banco Cuscatlán has done in El Salvador, have the potential to play a fundamental role in the growth and development of the SME segment. IDB Invest and IDB Lab remain committed to collaborating with crucial and strategic actors to promote the region’s progress and the digitalization of SMEs.
Through initiatives like this, we can improve not only their access to financing but also their business competence and capacity, helping to create leading SMEs that have a positive ripple effect on our economies and societies.