The Impact of Internet Finance on Macroeconomy

Name: Professor`s name: Course Code: Date: The Impact of Internet Finance on Macroeconomy Internet finance has been a key driver of the economy in several countries, especially in developing and developed nations. The key impediment to the adoption of internet finance to some of the developing and undeveloped countries emanates from poor internet infrastructure and unreliable electric grid to support it. Without proper electric grid then the internet infrastructure would be nearly useless. However, the countries with relatively stable and higher penetration of electric grid in their rural areas coupled with relatively good internet infrastructure are prime candidates for internet finance exploitation. Internet finance has become a key supplement to the traditional banking services because of governmental regulations and other related issues which have prevented traditional financial institutions from being able to reach a wider client base. For example, credit services offered by banks in the traditional system necessitated collateral or guarantees. On the other hand, internet financiers do not depend on guarantees and collateral, but on statistical models to evaluate the client’s creditworthinessCITATION Lia14 \l 1033 (Xiaozhong). Internet finance has prompted the evolution of financial services, and it is shaping macroeconomic policies, macroeconomic trends and has birthed a new sophisticated relationship with the economy. Influence of internet finance to macroeconomic Internet finance has had a huge impact on SMEs. Most SMEs have been grappling with accessing credit because of their lack of collateral. They have been experiencing slow growth and expansion. Internet finance has changed this trend, and more SMEs can access funds at a moment’s notice through internet finance. There are some internet finance companies which have majored and tailored their products to appeal to SMEs at ‘SME-friendly’ terms. Since most SMEs are either family, partner or individually owned, the individuals who run the business can also access quick funds from their smartphones to pump into their business for expansion. Concisely, it has empowered the individuals who own business to access funds easily and inject it into their businesses rather than following a tedious process of applying to banks or other financial institutions who take relatively longer to approve their loans. Thus, they have become a handy and convenient solution to SMEs to access funds to continue with their operations. In other cases, internet finance has become a way to pool funds to start businesses. Peer to peer lending and financial services has become a convenient way to pool resources to start a business. For instance, several people come together to pool funds to start their project. Online versions of crowdfunding have also been developed and have been used to start business or projects that affect the macroeconomic environment of a country. Macroeconomically, internet finance has also helped to reduce unemployment directly and indirectly. The firms whose business model is centered on offering credit services through applications directly employ people hence reducing unemployment. These firms have experienced a steep growth curve, and they continue to employ more pe...