The Emergence of DeFi for SME Financing

Yesterday was National Finance Awareness Day, a scheduled day to get your finances in order and be sure you are prepared for your future. The University of Greenwich have shared a blog on financing for SMEs and the emergence of decentralised finance.

Traditionally, when you want to fund new initiatives for your business, you seek a loan from a “centralised entity” like a bank. Decentralised Finance (DeFi) is finance without these institutions. It works peer-to-peer and digitally, often using blockchain technology. Because there is no middleman, it tends to be cheaper and more accessible. Moreover, it is global. Therefore, it is an attractive new possibility for (micro) small to medium enterprises (MSMEs/SMEs) to seek funding. The University of Greenwich is conducting ongoing research on how DeFi might be used by SMEs. This is a joint project by the Networks and Urban Systems Centre (NUSC) and the Centre for Business Network Analysis (CBNA) at the University of Greenwich Business School. We have been interviewing creators of DeFi projects and SMEs. Through these interviews, we can better understand what drives SMEs towards (or away from) using DeFi. We are also gaining insights into the current services offered by DeFi projects and what visions for the future their creators hold.


The University of Greenwich is conducting ongoing research on how DeFi might be used by SMEs.

This is a joint project by the Networks and Urban Systems Centre (NUSC) and the Centre for Business Network Analysis (CBNA) at the University of Greenwich Business School. We have been interviewing creators of DeFi projects and SMEs. Through these interviews, we can better understand what drives SMEs towards (or away from) using DeFi. We are also gaining insights into the current services offered by DeFi projects and what visions for the future their creators hold.

How could DeFi tokens fund a business?


A DeFi token is a digital representation of value. A DeFi token could represent monetary value, but it could represent other things, such as access to a resource or a physical asset. One of our interviewees, a founder of a DeFi project that turns real-world assets into digital tokens, supplies a vivid example of how DeFi can work to fund businesses. He explains that if you were a farmer, for example, who could not get a loan or local investments to build your business, you could use DeFi. If you owned your farmland, you could tokenise it – represent it digitally – and then sell fractions of that token. You still hold the land, but you can use that money to, for example, buy the tractor you need. Investors also benefit. They get to invest internationally, instantly and without fees. They don’t have the responsibilities associated with owning the land. They could sell their token tomorrow if they wanted. Or they could wait until the land price increases and then sell their token for a profit. It is a solution where everyone benefits. The business owner has a greater pool of potential investors, and the investors have access to more opportunities for investment.


What are the benefits of using DeFi?


A key benefit of DeFi is that it improves access to funding. Because it can serve people who can’t raise funds through traditional channels, it improves financial equity. If you can’t access a bank, or find funding through other channels in your country, then DeFi offers an alternative. In addition, DeFi improves the global mobility of funds as the value can be sent instantly across borders. In traditional finance, you might have assets but cannot make them liquid—for example, property. However, with DeFi, you can tokenise those assets and sell a proportion of that asset to gain funding whilst still holding that asset. More importantly, you can do so without the approval and fees of an intermediary as with traditional finance. Peer-to-peer lending is another way to raise funds through DeFi. Peer-topeer lending is more capital efficient than traditional lending because of fewer fees; investors and businesses get more out of the investment.


There are many reasons to explore the use of DeFi in financing a business. Our interviewees tell us it is a way to take custody of your assets, no longer paying fees to centralised institutions. DeFi can be a more efficient, quick, and cost-effective way of raising money. Many of our interviews emphasise that it is non-discriminatory, transparent, and immutable. DeFi services, because of blockchain technology,
can be more secure than traditional finance or crowdfunding methods.


What are the challenges to using DeFi?


DeFi is a new and emerging space. Whilst this brings opportunities, these opportunities come with uncertainty. The crypto market is highly volatile and largely unregulated. Although DeFi is a global phenomenon, regulations vary across countries. Regulatory uncertainty makes it difficult for the average business owner to evaluate the authenticity and trustworthiness of emerging projects or feel confident about their choice to enter DeFi. As said by another of our interviewees, “The regulatory environment obviously blocks things because most traditional companies must do things through the book, and there is no book yet.”


There is a substantial learning curve to understanding DeFi, DeFi projects, and the underlying technology. It is not always clear where to get information from and how biased the information found is. On the one hand, DeFi is user-friendly with attractive online apps offering rapid, easy, and non-discriminatory services. But on the other hand, getting onboard with DeFi is a considerable challenge, from finding a trustworthy project and setting up a crypto wallet to converting digital assets into real-world currencies.


Need Help?


The bottom line is simple, DeFi could revolutionise the ease and accessibility of funding to SMEs and entrepreneurs. However, many people who could utilise DeFi do not have the necessary knowledge or understanding to do so. Furthermore, a lack of regulatory clarity can stop SMEs from receiving help from DeFi due to fears that future regulatory changes will catch them out. Navigating this landscape can be tricky. But SMEs are not tapping the full potential of DeFi. So alongside our ongoing research in this domain – from cyber security and SME financing to digitisation using traditional research methods and data/network science approaches – the University of Greenwich is offering consultancy services in this area. If you are interested in knowing more, please

Meet the research team

Srinidhi Vasudevan
Lecturer in Business Management

Srinidhi’s research focuses on emerging technologies like
blockchain and decentralised finance and its implications for businesses and cyber security. She specialises in datadriven modelling using Machine Learning and network approach. Apart from teaching and research, Srinidhi has over 5 years of experience as a technology/data consultant and has worked for Cognizant Technology Solutions, Chennai and Accenture Technology Solutions, London.

Riccardo De Vita
Associate Professor in Management

Riccardo employs Social Network Analysis to explore
inter/intraorganizationl networks. His research supports organisations in promoting innovation and collaboration across a wide variety of settings.

Natasha Lawlor-Morrison

Natasha’s background is in psychology, research methods and statistics. She is currently completing a PhD in human resources and organisational behaviour, which focuses on developing learning agility

Eleftheria Panagiotopoulou

Eleftheria has a background in business management and
is currently undertaking a PhD in blockchain technology
and tokenisation. She teaches business at Greenwich University and Oxford Business College and is the CEO and founder of the Bor app

*We strive to do our best when supporting small business and their growth. Our business databases can give you information and data that can help you with advertising, market research, company information, and industry factsheets. If you have already taken the plunge, we would love for you to join us at a seminar, our workshops cover digital marketing, business model canvas and planning, demystifying taxes and intellectual property to name a few. Visit our events page or website for more information.


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