If you work in emerging market finance, development economics, or institutional lending, you have almost certainly encountered the figure: the global MSME finance gap is $5 trillion. Or $6 trillion. Or sometimes referred to as $8 trillion. The number varies depending on the source and the year, but the order of magnitude has become settled consensus, cited in G20 working papers, World Bank reports, investor presentations, and policy documents around the world.
We believe the consensus number significantly understates the problem. Our estimate, based on the same underlying IFC methodology but updated for current economic data and a more realistic treatment of the informal sector, puts the global MSME finance gap at $12.6 trillion annually. This is not a rounding difference. It is a meaningful methodological distinction and it matters for how investors, policymakers, and platforms like ours think about the scale of the opportunity and the urgency of the solution.
This piece explains where the $5–8 trillion figure comes from, why we think it understates the gap, and how we arrive at our estimate.
Where the $5–8 trillion figure comes from
The foundational source for almost all MSME finance gap estimates is the International Finance Corporation's 2017 report, MSME Finance Gap: Assessment of the Shortfalls and Opportunities in Financing Micro, Small, and Medium Enterprises in Emerging Markets. That report estimated the global finance gap at approximately $5.2 trillion for formal MSMEs, rising to $8.1 trillion when informal enterprises are included.
The IFC methodology works by estimating the total financing demand of MSMEs based on their share of GDP, employment, and credit intensity, and subtracting the supply of credit currently available to them from formal financial institutions. The resulting shortfall is the finance gap.
The figure most commonly cited today, the $5.7 to $8 trillion range, draws on an updated version of this analysis produced as part of the G20 Brazil 2024 Action Plan and a refreshed IFC MSME Finance Gap report. However, that update uses GDP estimates from 2019 as its baseline. Given the significant economic growth, currency movements, and structural shifts in emerging markets since 2019, including the post-pandemic acceleration of informal economic activity, we consider 2019 GDP figures to be a material understatement of current conditions.
Our methodology: the same foundation, updated inputs
Our estimate starts with the same IFC framework, the gap as a function of MSME credit demand relative to GDP, less available formal credit supply, but applies it to current IMF GDP projections for 2025 rather than 2019 figures.
The GDP-adjusted update alone accounts for a meaningful portion of the difference between our estimate and the most recent IFC figures. Emerging market economies have grown substantially in nominal terms since 2019, and MSME credit demand, which is correlated with economic activity, has grown with them.
The informal sector: the bigger adjustment
The more consequential methodological difference involves the treatment of the informal economy. The original IFC report assumed that the informal sector represented approximately 10% of GDP across the regions it studied. This was acknowledged at the time as a conservative assumption, and it has become more conservative still as our understanding of informal economic activity in emerging markets has improved.
More recent research, including work from the IMF, the World Bank's Informal Economy Database, and academic literature on shadow economy estimation, suggests that the informal sector in Sub-Saharan Africa, South and Southeast Asia, and Latin America is more likely to represent between 30% and 40% of GDP in many markets. If accurate, this implies that the IFC's original estimate of informal MSME financing demand was understated by a factor of three to four.
For Africa alone, correcting the informal sector assumption to a conservative 30% of GDP would push the regional financing gap from $813 billion to between $1.4 and $1.7 trillion annually.
We have not mechanically applied this correction to our global estimate as doing so would require market-by-market data that does not yet exist in a standardized form, and we do not want to overstate a figure that is already difficult to verify. Our $12.6 trillion estimate reflects the GDP-adjusted update but uses the IFC's original informal sector assumptions. The real number, on a more accurate treatment of informal activity, is likely higher.
Why this matters for capital allocators
The difference between a $5 trillion gap and a $12.6 trillion gap is not merely academic. It has direct implications for how institutional investors, development finance institutions, and private credit managers think about the opportunity.
A $5 trillion gap, distributed across dozens of emerging markets, can start to feel like a crowded space particularly given the volume of capital that has flowed into fintech lending, mobile credit, and digital financial services over the past decade. A $12.6 trillion gap, adjusted for where credit currently reaches and does not reach, is a different conversation entirely. It is a market where even ambitious capital deployment at scale, across multiple geographies, represents a fraction of unmet demand.
It also matters for risk perception. The persistent underestimation of the informal economy has historically contributed to the view that MSME lending in emerging markets is inherently high-risk because lenders operating without real business data have had no way to distinguish performing borrowers from non-performing ones. Better data does not just improve credit decisions. It recalibrates perceived risk, which in turn reduces the cost of capital, which in turn makes more of the gap closeable.
That recalibration is precisely what Sovara is building toward, starting with supply chain data in agri and mining, and building outward from there.