EMBEDDED FINANCE AS A TOOL TO ENSURE FINANCIAL INCLUSION FOR MICRO, SMALL AND MEDIUM SIZED ENTERPRISES

Abstract

The current economic and political crisis in Ukraine underscores the critical need to ensure financial security at all levels of the economic system, particularly for micro, small, and medium-sized enterprises (MSMEs). Limited financial inclusion poses significant challenges, as many businesses and individuals lack adequate access to financial services, hindering investment resource formation, expanding the shadow economy, and reducing fiscal revenues. Financial inclusion is recognized as a catalyst for economic resilience, fostering entrepreneurial activity and enabling the efficient transformation of savings into productive investments. This study explores the potential of embedded finance as a strategic tool for enhancing financial inclusion in Ukraine. Embedded finance refers to the integration of financial services directly into platforms used by MSMEs in their daily operations. This approach reduces transaction costs, eliminates bureaucratic obstacles, and increases accessibility to essential financial products such as loans and payment solutions. By enabling seamless access to financial resources, embedded finance can address barriers such as rigid lending criteria, insufficient collateral, and the high cost of traditional financial services. The research employs a qualitative analysis of embedded finance applications, focusing on their adaptability to Ukraine's unique economic and financial context. It highlights the ability of embedded finance to enhance risk assessment processes by leveraging operational data and to streamline access to credit and other financial products. The findings indicate that embedded finance accelerates decision-making processes, enhances financial stability for MSMEs, and expands access to financial services in underserved regions. These benefits are particularly significant for businesses operating in crisis conditions, as they allow for timely access to resources essential for maintaining operations and fostering growth. The practical value of this study lies in its demonstration of how embedded finance can support the financial inclusion of MSMEs, which play a critical role in economic recovery and development. The integration of financial services into digital platforms ensures broader participation in the formal financial system, strengthens economic resilience, and reduces dependency on informal financing channels. This approach also creates opportunities for financial institutions to expand their customer base while optimizing operational costs. By addressing the specific challenges faced by MSMEs in Ukraine, embedded finance offers a pathway to more inclusive and dynamic economic growth. Its implementation requires coordinated efforts among financial institutions, policymakers, and technology providers to ensure a secure, efficient, and transparent ecosystem that supports sustainable development.