Integration of DeFi with Traditional Finance: An SME Financing Example

This emergent research aims to examine the integration of Decentralized Finance (DeFi) with traditional financial systems (centralized finance – CeFi) to address persistent SME financing challenges. Despite their economic significance, SMEs face substantial barriers to conventional funding due to risk aversion, strict lending criteria, and high compliance costs. By analyzing DeFi-CeFi hybridization models across emerging and developed markets, this study aims to develop a framework for evaluating integration patterns, regulatory approaches, and blockchain architecture choices that influence successful implementation. Employing a mixed-methods approach, combining qualitative thematic analysis of stakeholder perspectives with quantitative machine learning techniques, the research seeks to identify key success factors in existing hybrid models. The study aims to contribute to both theoretical understanding of DeFi-CeFi dynamics and methodological approaches to analyzing financial technology integration. Findings will suggest evidence-based recommendations for regulatory frameworks and implementation pathways for financial institutions seeking to leverage DeFi protocols for enhanced SME financing.