The COVID-19 pandemic sparked a significant surge in the popularity of start-ups and small to medium-sized businesses, as individuals came to a profound realization of the empowerment that comes with owning their ventures. During the pandemic, many people faced uncertainties in their traditional jobs, leading them to explore alternative paths that offered greater autonomy and flexibility. This newfound perspective on entrepreneurship drove a wave of innovation and creativity, with aspiring entrepreneurs harnessing the power of technology and digital connectivity to bring their ideas to life.
And while the world adapted to working remotely and online transactions, removing several barriers to entry for budding entrepreneurs, there were still major challenges when it came to financing the initial start-up cost of a business. Though there are financial barriers to starting up any business, this problem was especially prominent when it came to smaller business start-ups as commercial banks were not so keen on providing such financing for several reasons.
In the Maldives, however, this specific financial barrier was removed in 2019 with the establishment of the SME Development Finance Corporation ( SDFC), a Government owned, and funded corporation which worked towards helping small to medium-sized start-ups obtain finance to support businesses while also working towards developing a healthy competition between the financial institutions.
This financing became helpful to any, especially following the pandemic in 2020 as small business start-ups started booming in the country with many finally tapping into their true skills as entrepreneurs. Not only does this bank work towards helping small to medium start-ups get the initial financing to keep the businesses afloat, but with the pandemic, SDFC also introduced a special form of financing targeted towards helping during the pandemic. While SDFC helped 2,146 businesses get financing under the COVID-19 financing scheme, by June 30, 2023, SDFC has helped 1,423 people acquire MVR 1.7 billion in loans so far as well.
As the momentum from the pandemic persists, a thriving culture of entrepreneurship now embraces risk-taking, innovation, and the pursuit of passion. Start-ups and small businesses have evolved into crucial drivers of economic progress, fostering a profound sense of empowerment and independence among individuals venturing into their own enterprises. In this transformative landscape, financial support, such as that provided by SDFC, has assumed paramount significance for entrepreneurs, serving as a vital lifeline to turn their visions into reality and fuel sustainable growth for the future.
However, the sustainability of this institution remains in question, as the capital comes directly from the government budget, as decided by the Minister of Finance. With questionable credit approval processes, and lending to politically connected borrowers, it can also be viewed as a vehicle to appropriate state funds, for political advantages.