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1、Ana Fiorella Carvajal Tatiana DidierBOOSTING SME FINANCE FOR GROWTH The Case for more Effective Support PoliciesPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedBOOSTING SME FINANCE FOR GROWTH The Case for more Effective Support Policies

2、SEPTEMBER 2024 Ana Fiorella Carvajal Tatiana DidierBOOSTING SME FINANCE FOR GROWTH The Case for more Effective Support Policies 2024 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington DC 20433 Telephone:202-473-1000 Internet:www.worldbank.org This work i

3、s a product of the staff of The World Bank with external contributions.The findings,interpretations,and conclusions expressed in this work do not necessarily reflect the views of The World Bank,its Board of Executive Directors,or the governments they represent.The World Bank does not guarantee the a

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6、rses the views expressed by those authors or the content of their works.Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank,all of which are specifically reserved.Rights and Permissions The material in thi

7、s work is subject to copyright.Because The World Bank encourages dissemination of its knowledge,this work may be reproduced,in whole or in part,for noncommercial purposes as long as full attribution to this work is given.Any queries on rights and licenses,including subsidiary rights,should be addres

8、sed to World Bank Publications,The World Bank Group,1818 H Street NW,Washington,DC 20433,USA;fax:202-522-2625;e-mail:pubrightsworldbank.org.Cover design:Diego Catto Val Layout:Good News Resources Sdn Bhd/viiBOOSTING SME FINANCE FOR GROWTHCONTENTSForeword .xiAcknowledgments .xiiiAbbreviations .xivExe

9、cutive Summary .xvCHAPTER 1The Enabling Role of Access to Finance for Productivity,Growth,and Resilience .1CHAPTER 2The Evolution of SME Financing .32.1 Debt Financing .3 2.1.1 Bank Lending for SMEs .3 2.1.2 Fintech Lenders .5 2.1.3 Asset-Based Financing.5 2.1.4 Capital Markets .62.2 Equity Financin

10、g for SMEs.7 2.2.1 Equity Financing for Innovative Firms.7 2.2.2 Equity Financing for Mature SMEs.82.3 Summary.9CHAPTER 3A Road Map for Enabling SME Finance .103.1 Action 1.Continue Enhancing the Availability of SME Credit Information .103.2 Action 2.Complete the Enabling Environment for Asset-Based

11、 Financing,Including the Implementation of Movable Collateral Registries.113.3 Action 3.Overhaul Insolvency Regimes.123.4 Action 4.Complete the Enabling Environment for Alternative Sources of Financing.123.5 Action 5.Foster Competition .153.6 Action 6.Develop the Enabling Environment for Equity Fina

12、ncing.153.7 Action 7.Enhance Consumer and Investor Protection .173.8 Action 8.Establish Robust Foundational Infrastructure.18viiiBOOSTING SME FINANCE FOR GROWTHCHAPTER 4 Toward a More Effective Use of Targeted Public Interventions .194.1 Action 1.Enhance Data Availability and Diagnostic Analyses to

13、Ensure Outreach to Underserved SMEs.214.2 Action 2.Emphasize Financial Additionality and Private Capital Mobilization as Clear Objectives of Targeted Interventions.224.3 Action 3.Deploy Concessional Financing Sparingly .234.4 Action 4.Leverage Developmental Finance from Donors for Private Capital Mo

14、bilization.244.5Action5.ComplementTargetedInterventionswithNon-financialSupport.244.6 Action 6.Improve the Evaluation of Targeted Interventions .254.7 Action 7.Improve Coordination,Including by Better Leveraging Existing DFIs,and Ensure Proper Governance.254.8 Additional Recommendations for the Desi

15、gn of Debt Interventions .264.9 Additional Recommendations for the Design of Equity Interventions.28CHAPTER 5 Selected Topics .315.1 Women-Led SMEs.315.2 Financing Investments in Mitigation and Adaptation to Climate Change for SMEs .335.3 Financing Agri-SMEs.375.4 SMEs in FCV countries.40CHAPTER 6 C

16、onclusion .43Appendix A.Misallocation of Firm Financing .45Appendix B.Microenterprises .47Appendix C.Selected Experiences .49Appendix D.Firm Capability and the Connection to Access to Finance .56Appendix E.The Principles for Public Credit Guarantees .58References .60Notes .66ixBOOSTING SME FINANCE F

17、OR GROWTHLIST OF FIGURES2.1 Sources of Financing for SMEs.42.2 Composition of Debt Financing for SMEs around the World .42.3 Composition of Equity Financing around the World.85.1 GHG Emissions around the World.36C.1 Number of Listed Companies at the KOSDAQ in Early Days of Development.50LIST OF TABL

18、ES3.1 Key Sources of Alternative Finance in EMDEs.133.2 Key Sources of Equity Financing in EMDEs.164.1 Targeted Interventions Supporting SME Finance.20C.1 VC-Backed IPOs at the KOSDAQ .50D.1 Selected Types of Access to Finance Related Capacity Building Interventions.56E.1 Coverage Ratios and Pricing

19、 Policies around the World.59LIST OF BOX4.1 Lessons Learned from Efficient National Development Financial Institutions(NDFIs).26xiBOOSTING SME FINANCE FOR GROWTHForewordSmall and medium enterprises(SMEs),which account for about half of employment worldwide,provide livelihoods for billions of people

20、and their families.Hit hard by the pandemic,SMEs needed public financing-support to remain afloat.As the crisis response shifts to recovery,the international development community is renewing focus on the fundamental question of how to help SMEs flourish.Removing the obstacles to their growth and pr

21、oductivity is at the heart of efforts to create more and better jobs and to eliminate poverty.Access to financing is essential for growth,productivity,and resilience.For decades,governments in emerging market and developing economies(EMDEs)have implemented programs to improve SME access to finance,o

22、ften at a large budget cost.Yet,the SME financing gap remains large,especially in the least developed countries,and public budgets are tight.How can governments in EMDEs enhance the effectiveness of support policies for SME finance?This new World Bank report,“Boosting SME Finance for Growth:The Case

23、 for More Effective Support Policies,”looks at this topic afresh and provides concrete,practical guidance to policy makers.The report draws insights from the experiences of both high-income countries and EMDEs while considering new developments that are changing the landscape of SME financingsuch as

24、 the rapid emergence of new financial technologies(fintech).The report calls for governments to prioritize improvements in the enabling environment,such as building the core infrastructure for both debt and equity financing.They should encourage the use of fintech and ensure a level playing field fo

25、r alternative lenders,including fintech lenders,factoring and leasing companies,and microfinance institutions.These actions carry limited fiscal costs but could bring sizeable benefits.Public financing programs are still needed.But governments must adopt a more evidence-driven approach for the desig

26、n and implementation of support to ensure it reaches the SMEs facing the most critical financial constraints.Robust diagnostics are also essential to tailor interventions to conditions in individual countries,so that they can effectively address the challenges that limit the ability and capacity of

27、financial institutions to reach SMEs.SME finance-support programs should also crowd in private capital.Policy makers must carefully monitor programs for the potential to displace commercial financing,especially programs that provide financing to SMEs at better terms than those available in the marke

28、tplace.Such programs can distort incentives for SMEs and for financial providers,limiting market development and availability of financing over the long term.Within this framework,we offer advice for designing and implementing programs to improve both debt and equity financing,through interventions

29、such as lines of credit and public guarantee schemes on the debt side,and investments in equity funds to spur the financing of innovation.Finally,the report also highlights four cases in which the challenges for SME financing have unique features that require a tailored policy approach:the financing

30、 of climate change adaptation and mitigation investments by SMEs,the financing of SMEs in the agriculture sector,the financing of women-owned businesses,and the financing of SMEs in countries affected by fragility,conflict,and violence.The recommendations in this report should help policy makers ens

31、ure that their SME finance programs promote a thriving SME segment,thereby boosting overall economic growth,productivity,and job creation.Jean PesmeGlobal Director,FinanceFinance,Competitiveness and Innovation Global PracticexiiiBOOSTING SME FINANCE FOR GROWTHAcknowledgmentsThis report was written b

32、y Ana Fiorella Carvajal and Tatiana Didier.The authors are grateful for contributions from the following:Lucero Burga,Pietro Calice,Fatou Fadika,Eva Gutierrez,Justin Hill,Jose Ernesto Lopez Cordova,Andres Federico Martinez,Anica Nerlich,Toshiaki Ono,John Luke Plevin,Alexander Giorgios Sotiriou,John

33、Wilson,Ricardo Bebczuk,and Carlos A.Brutomeso Panizzo.The work was carried out under the guidance of Pablo Saavedra(Prosperity Vice President)and Jean Pesme(Global Director,Finance,Competitiveness,and Innovation Global Practice).For reviewing various sections and providing peer review comments at di

34、fferent stages of the report,we especially thank the following:Mohamed Hassan Abdulkader,Randa Akeel,Irina Astrakhan,Nabila Assaf,Fadwa Bennani,Gian Boeddu,Julian Casal,Leyla Castillo,Loic Chiquier,Shanthi Divakaran,Mary Hallward-Driemeier,Thomas Kenyon,Mona Haddad,Alexandre Hugo Laure,Collen Masund

35、a,Sergio Jose de Mesquita,Thilasoni Benjamin Musuku,Harish Natarajan,Laila Nordine,Bujana Perolli,Aun Ali Rahman,Consolate Rusagara,Matthew Saal,Luz Maria Salamina,Asli Senkal,Sophie Sirtaine,Fiona Elizabeth Stewart,Francesco Strobbe,Ivor Stuck,Ahmed Mohamed Tawfick Rostom,Ghada Teima,Martien Van Ni

36、euwkoop,Niraj Verma,Pedro Xavier Faz de los Santos,and Wei Zhang.This report was supported by the Finance for Development(F4D)Umbrella Program,administered by the World Bank.F4D is a global partnership platform aimed at building deep,inclusive,resilient and efficient financial systems in low-and mid

37、dle-income countries.Find out more:finance4development.org.Production and design of this report was superbly managed by Eunice Ng and her team at Good News Resources Sdn.Bhd.Cover design was done by Diego Catto Val.Marcy Gessel provided editing assistance.Communications and outreach were led by Youj

38、in Choi,Elizabeth Price,and Nandita Roy.xivBOOSTING SME FINANCE FOR GROWTHAbbreviationsADB Asian Development Bankagri-SMEs agriculture SMEsagritech agricultural technologyAML/CFT anti-money laundering and combating the financing of terrorismASEAN Association of Southeast Asian NationsBIS Bank for In

39、ternational SettlementsCBA/NCBA Vodafone and Commercial Bank of KenyaCCAF Cambridge Center for Alternative FinanceCDD customer due diligence CGAP Consultative Group to Assist the PoorCRA credit rating agencyDFI development financial institutionDFS digital financial servicesEBA European Banking Autho

40、rityEBRD European Bank for Reconstruction and DevelopmentEIB European Investment BankEMDEs emerging market and developing economiesEU European UnionFCV fragile,conflict,and violencefintech financial technologyGCF Green Climate Fund GDP gross domestic productGHG greenhouse gasGPFI G20 Global Partners

41、hip for Financial InclusionHIC high-income countryICCR International Committee on Credit ReportingIDFC International Development Finance ClubIFC International Finance CorporationILO International Labour OrganizationIMF International Monetary FundIPCC Intergovernmental Panel on Climate ChangeIPO init

42、ial public offeringKOSDAQ Korean Securities Dealers Automated QuotationsKONEX Korea New ExchangeKOSPI Korea Exchange Main BoardKRX Korea ExchangeLIC low-income countryLoC line of creditM&E monitoring and evaluationMFI microfinance institutionMIC middle-income countryMSMEs micro,small and medium ente

43、rprisesNAFIN Nacional FinancieraNBFI non-bank financial institutionNDFI national development financial institutionNGF National Guarantee Fund(Colombia)OECD Organisation for Economic Co-operation and DevelopmentPCG partial credit guaranteePCGS public credit guarantee schemesPE private equityR&D resea

44、rch and developmentRXIL Receivables Exchange of India LtdS&P Standard and PoorsSAFE simple agreement for future equitySMEs small and medium enterprisesUMIC upper-middle income countryUNEP United Nations Environment ProgrammeUSAID US Agency for International DevelopmentUNSGSA United Nations Secretary

45、-General Special Advocate for Inclusive Finance for DevelopmentVC venture capitalWSMEs women-owned(and led)SMEsxvEXECUTIVE SUMMARY Executive Summary New research by the World Bank demonstrates that removing debt and equity financing constraints for small and medium enterprises(SMEs)can lead to signi

46、ficant gains in productivity,growth,and resilience.1 SMEs in emerging market and developing economies(EMDEs)often consider the constraints in access to finance one of the top obstacles for business operations and growth.Indeed,smaller private firms face the largest financing constraints in middle-in

47、come countries(MICs).Removing financial frictions and distortions,thereby relaxing access to finance constraints for firms,could result in large productivity gains of up to 86 percent in MICs,with the largest gains observed among MICs with lower levels of gross domestic product(GDP)per capita.Financ

48、ial constraints hinder not only the productive growth of SMEs,but also their ability to cope with adverse shocks.World Bank research shows that,during the pandemic,firms with access to external financing were better able to maintain employment levels and avoid falling into arrears.Smaller private fi

49、rms had the highest probability of being financially constrained during the pandemic.Governments have implemented different types of interventions to address the constraints hampering SME access to finance,but huge financing gaps remain.These constraints stem from the characteristics of SMEs(high cr

50、edit risk,opacity,and lack of suitable collateral).In addition,lending to SMEs is marked by higher transaction costs when compared to large corporates,partly because of the smaller transaction size.These challenges are often heightened in EMDEs given additional supply-side shortcomings,such as the l

51、ack of competition in the banking sector,missing markets(for example,the lack of equity markets in some countries),and inadequate enabling environments that underlie private financing to SMEs.As a result,governments have deployed a wide set of interventions to support the enabling environment(for ex

52、ample,development of credit-reporting systems,secured transactions and collateral registries,and insolvency regimes)as well as targeted interventions to directly affect the supply of financing with fiscal costs(for example,lines of credit,partial credit guarantee schemes,and,increasingly,investment

53、programs in venture capital funds).Yet,the credit gap for SMEs in EMDEs persists.The most recent estimates for the formal micro,small,and medium enterprises(MSMEs)sector as a whole place this gap at 19 percent of GDP as of 2020(about US$5.7 trillion).2 Similarly,the private markets for equity financ

54、ing have remained underdeveloped.Thus,the case for government support remains compelling.The need for further progress in closing the financing gaps,heightened by recent global developments that are changing the landscape of SME financingsuch as the rapid emergence of new financial technologies(fint

55、ech)and the growing challenges posed by climate changerequire governments to review their toolkit of interventions to maximize the effectiveness of support policies.This report supports such review by building on the experiences of both high-income countries(HICs)and EMDEs to draw insights and lesso

56、ns to inform the range of interventions that governments in EMDEs should pursue to close the SME financing gap.The Evolution of SME FinancingBanks in EMDEs remain by far the main providers of financing for SMEs.But the SME loan portfolios of banks in EMDEs remain significantly smaller than those of

57、banks in HICs.Although SME loans have expanded in real terms between 2010 and 2020,they have declined as a share of GDP in MICs and HICs.For example,estimates in this report show that SME loans in HICs amounted to 12 percent of GDP in 2020,compared to 7 percent for MICs and 3 percent in low-income c

58、ountries(LICs).Similarly,private markets for equity financing,which are critical to spur innovation,remain small in most EMDEs.Venture capital(VC)investments stood around 0.01 percent of GDP or less in EMDEs,and only a handful of countries have markets with greater depth.3 The bulk of equity investm

59、ents in private markets in EMDEs is concentrated in larger firms,more so than in HICs.Even then,the financing of mature SMEs remains underdeveloped.Including buy-out funds and growth equity,private equity(PE)funds represented 0.03 percent of GDP in MICs in 2020 versus 0.3 percent in HICs.4While fint

60、ech is helping financial intermediaries reach SMEs and alternative sources of financing are expanding in select xviBOOSTING SME FINANCE FOR GROWTHEMDEs,the aggregate impact remains unclear.Case studies and anecdotal evidence suggest that some banks in selected HICs and EMDEs have improved their outr

61、each to SMEs via the use of fintechdirectly or via partnershipssuch as embedded finance.Nonetheless,research is still inconclusive regarding the full scope of this increased outreach.Progress has been made toward expanding the range of alternative lenders.Some of these new lendersespecially,fintech

62、lenders(digital banks and fintech lending platforms in particular)have reached underserved SMEs,albeit mostly for short-term financing thus far.In addition,asset-based lenders are providing working capital to SMEs(for example,through factoring)and financing for investments(for example,via leasing).C

63、apital markets solutions have also helped diversify the range of funding sources for SMEs,which can be important in turbulent times,supporting firm resiliency,as well as in normal times,supporting better financing conditions for SMEs.Specialized SME exchanges have emerged in some EMDEs,enabling SMEs

64、 to access financing from a wider range of investors for SMEs.Yet all these alternative sources of financing remain small in most EMDEs and are mostly concentrated in large,more developed EMDEs.A Road Map for Enabling SME FinanceGovernments should prioritize the implementation of an enabling environ

65、ment to support SME financing.This agenda carries very limited fiscal costs,while the benefits could be sizeable.Many EMDEs have embarked on this work,but it is time to deepen and expand it.Policy makers should aim at building the core market infrastructure,fostering increased use of fintech,ensurin

66、g that an enabling environment for alternative lenders and for equity financing is in place,promoting market competition,and addressing concerns related to consumer protection.The following road map,which is consistent with the 2022 Updated G20/OECD High-Level Principles on SME Financing,outlines a

67、list of key actions EMDEs should implement urgently,with due consideration to country contexts.Action 1.Continue enhancing the availability of SME credit information.Governments should continue to actively promote the development of credit-reporting systems,paying special attention to expanding thei

68、r coverage to include alternative lenders and leveraging alternative data.Action 2.Complete the enabling environment for asset-based financing,including the implementation of movable collateral registries.The adoption of modern secured transactions laws,covering,for example,factoring and leasing,alo

69、ng with the implementation of movable collateral registries that formalize and provide transparency to lenders claims,are critical to expanding asset-based financing.Lessons indicate the importance of expanding the range of assets that can be given as collateral,adopting notice-filing,online central

70、ized(or interoperable)movable collateral registries,and effective out-of-court mechanisms to execute collateral.Other government initiatives,such as e-invoicing,should be leveraged to further the development of markets for receivables.Action 3.Overhaul insolvency programs.Specialized SME insolvency

71、regimes should be implemented to lower barriers and improve access to out-of-court restructuring procedures and to simplify in-court insolvency proceedings to reduce their cost and complexity.Action 4.Complete the enabling environment for alternative sources of financing.Governments should support t

72、he development of a wide set of alternative lenders that can foster greater outreach to SMEs.Depending on country context,especially the level of financial sector development,the enabling environment policy agenda should include proportionate licensing regimes for microfinance institutions(MFIs),coo

73、peratives,and fintech lending platforms;adjustments to bank licensing regimes to allow the entrance of digital banks;and,in MICs with more developed capital markets,an enabling environment for capital markets solutions supporting financing to SMEs.Action 5.Foster competition.Fintech and alternative

74、lenders can change market structure and competition dynamics in a way that would hinder SME financing.Key areas to monitor include market entry requirements and coverage of credit reporting systems,with consideration given to the implementation of open finance programs.Governments can also explore i

75、nnovative interventions,such as platforms to bring multiple financial providers together and foster competition.Action 6.Develop the enabling environment for equity financing.Focus on private markets and allowing SMEs to raise funding directly,without triggering the disclosure and governance require

76、ments of a public offering.Depending on country context,governments should develop the enabling environment for private funds and equity crowdfunding.In EMDEs with more developed equity markets,governments should strengthen the enabling environment for SME listings.Action 7.Enhance consumer and inve

77、stor protection.Governments should ensure that their frameworks against deceptive and fraudulent practices apply to new providers of financing,and across all types of xviiEXECUTIVE SUMMARY delivery channels.For capital markets,there is a need to balance easing SME access to retail investors with inv

78、estor protection.Action 8.Establish robust foundational infrastructure.Digital connectivity and digital payment services are essential to leverage fintech for SME financing.Online business registration as well as broader digitalization of business operations can also support access to finance by hel

79、ping SMEs build“reputational collateral”and thus a more robust credit footprint.Toward a More Effective Use of Targeted Public InterventionsEnabling environment interventions are necessary,but they are not always sufficient.Targeted financial interventionswhich carry fiscal costs but can mobilize pr

80、ivate investmentmay still be needed.In practice,in most EMDEs,a multipronged approach to public intervention is necessary to address the debt and equity financing gaps.But policy makers must be cognizant of the trade-offs in allocating resources to support each type of financing,especially when fisc

81、al resources are scarce.Debt financing is the most important source of external financing for SMEs in EMDEs,with government support programs exhibiting widespread reach.In contrast,schemes supporting equity financing typically have a more limited reach,covering a smaller set of SMEs due to their hig

82、h costs.Policy makers should be realistic about not only the desirability of interventions,but also their feasibility and impact,based on their own country contexts.While there is no rigid sequencing in the implementation of interventions,governments need to be mindful of the state of preconditions

83、for different financial instruments.The implementation of well-designed targeted interventions,coupled with improvements in the enabling environment,should enhance SME access to finance.However,without further progress in addressing the underlying causes of the underdevelopment of the financial sect

84、or more broadly,the effectiveness of such interventions might suffer.Targeted interventions might help push the frontiers of the financial sector,but they cannot do all the heavy lifting.Going forward,governments in EMDEs need to substantially improve the design of their targeted interventions to in

85、crease their effectiveness.Governments must adopt stronger,evidence-driven approaches to ensure that interventions benefit underserved SMEs and focus on addressing the key market failures and identified gaps.Furthermore,interventions should be designed and deployed in a way that fosters financial ad

86、ditionality and mobilizes additional private financing,thereby promoting the creation of financial markets and reducing the need for public sector support over time.The seven recommended actions that follow outline the agenda to improve the design and implementation of targeted interventions.Action

87、1.Enhance data availability and diagnostic analyses to ensure outreach to underserved SMEs.There is no universal model of interventions for all EMDEs to apply.Interventions need to be selected and designed using rigorous data-driven diagnostics of financing gaps and their underlying causes.Most EMDE

88、s would need substantial improvements in data collection,reporting,and accessibility to ensure effective targeting of underserved segments and intermediaries serving them.Action 2.Emphasize financial additionality and private capital mobilization as clear objectives of targeted interventions.Targete

89、d interventions in EMDEs should mitigate key market failures hindering private financing to SMEs,while making more strategic use of public funds.To this end,governments need to improve the design of interventions so that programs reach their intended beneficiaries,as defined in specific program obje

90、ctives.Critically,public funds should be used to leverage additional private financing.Governments thus need to carefully evaluate the sustainability of crowding-in effects,while avoiding crowding-out effects.Action 3.Deploy concessional financing sparingly.Concessional financing should be used only

91、 in exceptional circumstancesfor example,when it is critical for private capital mobilizationand should include an exit plan.Governments should thoroughly assess(a)whether market failures justify concessionality and determine the objectives to be achieved with its use;(b)the extent of potential mark

92、et distortions,including crowding-out effects for private capital;and(c)the need to deploy mechanisms to mitigate such risks.Interventions should also embed graduation targets(for both SMEs and financial institutions).Action 4.Leverage developmental finance provided by donors for private capital mob

93、ilization.Governments should systematically map the global developmental financing available in the SME space and leverage it through blended finance structures xviiiBOOSTING SME FINANCE FOR GROWTHto mobilize additional private capital and reduce the need for public financing.Action 5.Complement tar

94、geted interventions with non-financial support.Programs to enhance firm capabilities are critical to building a healthy pipeline of SMEs for lending or investing.Depending on country context,programs to enhance the capabilities of financial intermediaries and investors might also be needed.Action 6.

95、Improve the evaluation of targeted interventions.Governments should establish robust and independent monitoring and evaluation(M&E)frameworks aimed at better measuring impact,going beyond the typical statistics monitored across EMDEs,such as the number of SMEs and the volume of financing.M&E systems

96、 could also guide the design and implementation of policy interventions.Action 7.Improve coordination,including by better leveraging existing development financial institutions(DFIs)while ensuring proper governance.Governments should better leverage existing DFIs.For example,governments can ensure t

97、hat any new program aimed at implementing targeted financial interventions is fully coordinated with existing DFI programs.This requires stepping up efforts to improve the effectiveness of DFIs,develop a holistic strategy for SME financing,and enhance day-to-day coordination arrangements.Finally,rob

98、ust governance arrangements should be in place to(a)mitigate political interference in technical decisions;(b)ensure that political interests do not outweigh long-term program objectives;and(c)ensure proper oversight and accountability.Debt InterventionsGovernments should more deliberately use targe

99、ted interventions to foster the development of alternative lenders while continuing to strengthen bank financing for SMEs.Banks have been the key delivery partners for targeted public support.Yet while banks will remain a key funding source for SMEs,they are not sufficient to address the SME credit

100、gap.Alternative lenders are critical to closing this gap.Thus,governments need to use interventions to foster their development.Three consequences of this requirement are the need for governments to(a)reduce the use of direct lending;(b)remove requirements that create undue barriers for alternative

101、lenders to access interventions by relying more on proportionate requirements;and(c)consider the use of targeted interventions to address the constraints faced by alternative lenders.The type of interventions to deploy will vary depending on country context and could include the following.Capitaliza

102、tion of partial credit guarantee(PCG)schemes:Governments should continue to expand the implementation of PCGs as the key intervention to address problems stemming from the high riskiness(perceived and real)of SMEs,which is heightened by their opacity,lack of collateral,and limited credit histories.T

103、he implementation of PCGs,however,is complex and requires a certain level of maturity within institutions to ensure their effectiveness.Lines of credit(LoCs)should be used more selectively to address gaps in the funding markets that affect the ability of different intermediaries to serve the SME seg

104、ment.In exceptional circumstances,concessional lines of credit could be used to make lending to SMEs(or a particular segment of SMEs)commercially viable for private lenders and provide better lending conditions to SMEs.Other interventions:Depending on the country context,governments could consider i

105、nterventions to foster the development of capital markets solutions that can be used by both SMEs and SME lenders,such as investment programs and credit risk guarantees(or other risk-sharing arrangements).Equity InterventionsPublic interventions supporting equity finance in private markets have face

106、d challenges in mobilizing private investors in many EMDEs,especially in LICs.This limited impact is largely the result of challenges with preconditions,which relate to uncertainty in the macroeconomic and financial environment,the limited development of an investor base,and missing components of th

107、e legal and regulatory environment for equity financing.The economic additionality that these interventions could bring for innovation and growth might lead some governments to pursue them,irrespective of the challenges.This could be an acceptable choice;however,in such context,governments should re

108、calibrate the objectives of their interventions,understanding that they need to focus on“market creation”xixEXECUTIVE SUMMARY and that mobilizing private investors would likely require a greater level of financial support across the whole ecosystem for a long period of time.Moreover,governments woul

109、d need to address the structural problems that have hindered the development of equity financing.In any event,equity interventions,even in MICs,require a longer time horizon to reach sustained impact,with governments being ready to provide patient capital.Overall,in supporting equity financing throu

110、gh private markets,governments need to apply private sector practices to improve the mobilization of private capital.In practice,this means relying on private sector structuresin particular,fundsto achieve scale and diversification.The management of funds should be professional and independent,free

111、of government interference.Such an approach would ensure that public investments follow the market.There should also be flexibility in the type of financial instruments used,including equity as well as other forms of risk capital,such as mezzanine financing.In addition,governments need to consider a

112、 holistic approach to developing the overall landscape for equity financing,entrepreneurship,and innovation to improve the prospects for effective policy interventions.The scope of support programs would depend on country context.These programs would likely include technical assistance for SMEs as w

113、ell as support for the creation of other entities that can play an instrumental role in building the deal flow,such as incubators and accelerators.Capacity building to support the development of the investor base might also be needed.Governments in EMDEs should focus on interventions for equity fina

114、ncing in private markets,but for a select set of EMDEs with more developed public equity markets,governments could carefully assess the feasibility and potential impact of other interventions,such as to support SME listings.The Need for a Tailored Approach for SMEs in Select CasesEvidence suggests t

115、hat SMEs face additional challenges to access financing in select cases that require a tailored approach to public support interventions.While there is a need for more data,research,and systematic evaluations that can better guide the design of effective interventions,some relevant cases follow here

116、.Women-owned(and led)SMEs(WSMEs).Addressing gender gaps in SME financing requires strong commitment from policy makers,starting with the integration of a gender lens in the design of SME access-to-finance interventions.World Bank experiences supporting governments in closing the gender finance gap h

117、ighlight the importance of earmarking resources for WSMEs and relying on a wider range of financial providers for the deployment of targeted financial interventions.Governments should also place increased attention on the development of customized financial offerings for women entrepreneurs,includin

118、g alternative delivery channels(that is digital channels),staff training on how to engage with women entrepreneurs,and the provision of tailored non-financial services for WSMEs to complement core financial services.These efforts should be anchored in the collection of gender disaggregated data.Fina

119、ncing adaptation and mitigation efforts by SMEs.Addressing the impact of climate change on SMEs requires a recalibration of government efforts.First,policy support for SME finance needs to be rebalanced to provide greater attention to climate adaptation investments.Thus far,both policies supporting

120、the enabling environment as well as targeted interventions have emphasized climate mitigation efforts.Second,access to finance for SME adaptation requires a bottom-up approach that prioritizes localized solutions with widespread reach across SMEs vulnerable to physical risks(such as extreme climate

121、events).In contrast,a top-down approach could be a more effective way of supporting mitigation for SMEs.That is,government decarbonization efforts should focus on large businesses,but greater emphasis and support should be given to SMEs that are part of large businesses global supply chains or those

122、 SMEs for which decarbonization efforts might be needed to ensure competitiveness,such as those directly exporting to countries with high sustainability standards.Third,the public good feature underlying adaptation and mitigation investments,which is often perceived as lack of a business case for su

123、ch investments by individual SMEs,justifies the provision of concessional financing to SMEs.Fourth,the high uncertainty surrounding these investments tends to increase their risk versus conventional investments.Hence,policy makers could place greater emphasis on de-risking adaptation and mitigation

124、financing.Financing SME investments in adaptation and mitigation requires efforts to complete the enabling environment,but governments should pay close attention to unintended consequences.Taxonomies and climate-related disclosure requirements are essential building blocks of the xxBOOSTING SME FINA

125、NCE FOR GROWTHenabling environment for the financing of sustainable and climate-resilient projects;but they may have unintended consequences and negatively affect financing to SMEs.For instance,financial institutions may reallocate their loan portfolios away from SMEs highly exposed to physical and

126、transition risks.They may also retrench from borrowers that are unable to provide information on climate-related risks.For SMEs,the need for additional information,and even certification in some instances,would also increase transaction costs and may discourage some SMEs from seeking financing in th

127、e first place.Akin to such challenges,if alternative lenders are not able to track climate-related risks in their own lending portfolios,they may face constrained access to funding,hindering their ability to serve their SME clients effectively.Agriculture SMEs(agri-SMEs).Governments need to place in

128、creased emphasis on scaling up commercial financing for agri-SMEs through greater use of risk-sharing mechanisms,such as PCGs,while deploying LoCs conditioned to private capital mobilization.In addition,a wider set of financial providers should be included in these interventions,along with strengthe

129、ned use of technical assistance.A key additional consideration is the need to incorporate mechanisms to strengthen the resiliency of agri-SMEs to shocks,including through insurance markets,for which public-private partnerships may be needed.Finally,governments should consider demand-side interventio

130、ns to improve agri-SMEs integration into value chains,their access to markets,and their business performance.SMEs in countries affected by fragility,conflict,and violence(FCV).Governments should prioritize the development of the enabling environment,with emphasis on basic credit infrastructure and t

131、he infrastructure necessary to leverage fintech.Targeted interventions should focus on unlocking debt financing,especially interventions that address the high riskiness of SMEs,such as PCGs,combined with enhanced non-financial support to SMEs and financial intermediaries.Concessional financing might

132、 be warranted,but its use needs to be carefully assessed to mitigate unintended consequences,including to overall financial market development.Equity interventions should also be carefully assessed,given the greater challenges that FCV countries face in mobilizing private capital and creating financ

133、ial markets.Capacity constraints and security concerns might require adjustments in the design and implementation of interventions,such as the simplification of eligibility criteria and delivery and evaluation through third parties.Finally,a holistic approach to the business enabling environment age

134、nda is warranted.11.THE ENABLING ROLE OF ACCESS TO FINANCE FOR PRODUCTIVITY,GROWTH,AND RESILIENCECHAPTER 1 The Enabling Role of Access to Finance for Productivity,Growth,and ResilienceSmall and medium enterprises(SMEs)are the backbone of the economy in most emerging market and developing economies(E

135、MDEs),but they face critical challenges in access to finance.SMEs represent roughly 9 out of 10 businesses globally,account for more than 50 percent of employment in EMDEs,and contribute to 40 percent of gross domestic product(GDP).5 Disruptions caused by the recent COVID-19 pandemic have raised glo

136、bal awareness about the importance of SME resilience for countries overall economic prospects.Yet,a complex set of challenges constrains SME resilience,growth,and productivity and thus hinders their potential to create more and better jobs.SMEs in EMDEs often consider access to finance(or the lack t

137、hereof)a critical obstacle for business operations and growth.6 Indeed,there are sizeable differences in access to debt and equity financing for SMEs in EMDEs compared to SMEs in high-income countries(HICs).For example,Didier and Cusolito(2024)show that smaller private firms,especially those with fe

138、wer than 100 employees,face the largest financing gaps in middle-income countries(MICs).7Despite widespread public support programs in EMDEs,SMEs continue to face a sizeable financing gap.Government support in EMDEs has consisted of interventions to develop the enabling environment,with efforts focu

139、sed on strengthening critical financial infrastructure(for example,credit information systems,secured transaction frameworks,and insolvency regimes)and targeted interventions aimed at increasing the supply of financing for SMEs(for example,via the provision of lines of credit LoCs,partial credit gua

140、rantee PCGs schemes,and the implementation of investment programs in venture capital funds).Thus far,there is limited evidence that government support programs have been widely successful in fostering SME financing.The most recent estimates focus on the micro,small,and medium enterprise(MSME)financi

141、ng gap and show that the credit gap for formal MSMEs has remained fairly constant in recent years.For 2019,the gap was estimated to be about US$5.7 trillion,equivalent to 19 percent of GDP and 20 percent of the overall private sector credit issued by banks in EMDEs.8 These percentages are roughly at

142、 the same level as they were in 2015.9 Similarly,the private markets for equity financing remain underdeveloped in most EMDEs.Addressing the financial distortions that hinder SME access to finance could yield significant gains in economic growth and productivity and could also bolster private sector

143、 resilience.10 World Bank research shows that smaller private firms face the largest financing constraints in MICs.Removing financial frictions and distortions,thereby relaxing firms financial constraints,could boost MICs productivity by up to 86 percent.Moreover,the estimations show that larger pro

144、ductivity gains would accrue for smaller firms than for larger firms.Importantly,these gains diminish as income levels rise.As such,countries with lower GDP per capita would benefit more from a more efficient allocation of finance toward smaller firms.Financial constraints not only hinder the produc

145、tive growth of SMEs,but they also hamper their ability to cope with adverse shocks.World Bank research shows that,during the pandemic,firms with access to external financing were better able to maintain employment levels and avoid falling into arrears.Smaller private firms had the highest probabilit

146、y of being financially constrained during the pandemic.Countries with higher GDP per capita and with more developed financial markets had less financially constrained firms.Appendix A provides a detailed summary of this research.Governments should thus focus on mitigating the key market failures and

147、 frictions that hinder SME access to finance.11 These market failures relate to the inherent characteristics of SMEs,namely(a)their greater opacity(SMEs often lack credible financial statements);(b)their relatively high riskiness(this is partly a reflection of lower capabilities and financial 2BOOST

148、ING SME FINANCE FOR GROWTHliteracy);and(c)their lack of suitable assets for debt financing,in particular immovable assets that could be used as collateral and could also mitigate the challenges associated with(a)and(b).Due to information asymmetries and a lack of tools to overcome them,lenders face

149、great difficulties in assessing SME creditworthiness,monitoring their actions,and enforcing repayment,which negatively affect lending to these firms.Lending to SMEs is also marked by higher transaction costs compared to large corporations due in part to the smaller transaction size.Furthermore,addit

150、ional challenges emerge from the structure and level of development of the financial sector,which are more pronounced in EMDEs.A low degree of bank competition hinders bank lending to SMEs.12 The more limited development of financial markets in EMDEs can also constrain the role of financial intermed

151、iaries and investors in SME financing.Finally,EMDEs typically have underdeveloped financial infrastructures,especially credit information systems,as well as deficient enabling environments supporting private investors,such as limited property rights,low contract enforcement,and an inefficient judici

152、ary system.13 The increased use of financial technology(fintech)in SME financing has brought additional benefits and risks that require governments to adjust their interventions.14 Fintech has the potential to address some of the critical challenges hindering access to finance for SMEs.For instance,

153、the use of alternative data and new credit-scoring methods seems to effectively mitigate the frictions related to information asymmetries and to some extent also the lack of acceptable collateral.Moreover,fintech solutions have the potential to reduce the high transaction costs and enable scalabilit

154、y in SME financing by increasing digitalization and automation.However,fintech solutions do not tackle all the constraints of access to finance for underserved SMEs.The higher riskiness(perceived and real)of the SME segment remains largely unresolved by fintech solutions.While financial institutions

155、 have leveraged the predictive powers of big data and artificial intelligence for short-term,working capital loans,they have yet to explore those tools for longer-term loans.15 Importantly,fintechs use also raises new obstacles that can constrain access to finance.For example,fintech may exacerbate

156、risks to competition,consumer protection,and data privacy and cybersecurity.Thus,governments need to adapt their interventions to this new environment,fostering the use of fintech while ensuring that risks are adequately mitigated.Furthermore,climate change has added another set of challenges to SME

157、 financing that requires a different set of interventions.On one hand,SMEs will need access to finance to undertake climate mitigation and adaptation efforts that can support their competitiveness and resilience.On the other hand,the financial sectors increased adoption of sustainability practices m

158、ay pose additional challenges for SME financing.The additional levers of policy for the financial sector are typically composed of new reporting and disclosure requirements for regulated financial institutions related to the climate risk exposures of their portfolio.These additional reporting requir

159、ements may hinder SME financing precisely because of the opacity of small firms and their limited capacity to provide data on environmental performance.These issues can be particularly challenging when firms capabilities and financial literacy are already in need of strengthening.Authorities thus ne

160、ed to support SMEs in their journey to adapt to new climate conditions by adding new targeted interventions that facilitate access to sustainable financing options.At this critical juncture,this report will assist policy makers in EMDEs in reviewing and strengthening their access to finance support

161、programs by providing a strategic view of the key issues involved in SME financing.This report builds on the experiences of both HICs and EMDEs,drawing on the lessons learned,to help EMDEs deploy more effective interventions.This report focuses exclusively on SMEs and does not cover microenterprises

162、 because of their unique characteristics,such as their high level of informality and sole proprietorship,which require a dedicated policy agenda.Appendix B briefly explains the key differences between SMEs and microenterprises and the impact on the policy agenda.This report is organized into five ad

163、ditional chapters:Chapter 2 provides evidence on the evolution of external sources of financing for SMEs,contrasting EMDEs versus HICs,considering both bank and non-bank financing,and whether and how fintech is changing the landscape for SME financing.Such a diagnostic is crucial for the assessment

164、of an adequate set of policy options.Chapter 3 provides a road map for EMDEs to tackle the core enabling environment necessary to foster the development of debt and equity financing for SMEs.Chapter 4 delves into targeted interventions to affect the supply of both debt and equity financing to SMEs,f

165、ocusing on key recommendations to improve their effectiveness.Chapter 5 discusses four selected cases that require a tailored approach to policy support:access to finance(a)to women-owned(and led)business(WSMEs);(b)to support climate change mitigation and adaptation efforts by SMEs;(c)to agriculture

166、 SMEs;and(d)to SMEs in fragility,conflict,and violence(FCV)countries.The chapter addresses two main questions:(a)whether and how the factors that constrain access to finance for SMEs in each of these cases are different from those outlined in chapter 3,and(b)whether and how public interventions shou

167、ld differ from those described in chapters 3 and 4.Chapter 6 brings the landscape of SME financing and government support together,highlighting key messages and recommendations.32.THE EVOLUTION OF SME FINANCINGCHAPTER 2 The Evolution of SME Financing SMEs rely on different forms of funding,both inte

168、rnal and external,to support their activities and growth.16 This report focuses on external financing options,which vary according to SME size,financing needs,and risk profile(figure 2.1).The range of financing options has evolved over time in EMDEs,with fintech offering new opportunities.But what d

169、oes this evolution of financing options mean for SMEs?Has financing become less of a constraint?Are banks less relevant today?Should governments rethink their support to ease the constraints hindering access to finance for SMEs?This chapter aims to shed light on these questions by offering an update

170、d view of the SME financing landscape.2.1 Debt Financing2.1.1 Bank Lending for SMEsGlobally,banks remain the main source of external debt financing for SMEs in both developed and developing countries(figure 2.2).In HICs,SMEs have access to other sources of debt financing outside of banks,as these so

171、urces(for example,receivables financing,leasing)are relatively well-developed.However,this is not the case in MICs and low-income countries(LICs).In most EMDEs,bank loans account for the bulk of the debt financing for SMEs.Such dominance by the banks arguably reflects the competitive advantages of t

172、heir business model,for instance,their access to relatively cheap funding from deposits and their ability to cross-sell and bundle products.Despite being the main source of debt financing,bank lending to SMEs is still relatively underdeveloped in EMDEs.For example,the volume of SME loans is smaller

173、in MICs than in HICs when measured as a share of GDP.In 2020,SME loan volume represented 7.4 percent of GDP for MICs versus 11.9 percent for HICs.Although comprehensive data for LICs are limited,evidence from a small subset of countries indicates that SME bank loans represented an even smaller share

174、 of GDP,estimated at 2.6 percent for the median country.17 SME loans expanded in real terms between 2010 and 2020,but they have declined as a share of GDP in MICs and HICs.The MIC-HIC differential has remained relatively stable over time.The small size of the banking sector in EMDEs explains,at leas

175、t in part,the underdevelopment of bank financing to SMEs.Research also shows that economic and financial development is positively correlated with SME loans from banks.184BOOSTING SME FINANCE FOR GROWTHFIGURE 2.1 Sources of Financing for SMEs MicroSmallMediumLargeShort termMedium termLong termFinanc

176、ing Needs:MicrofinanceBanksFactoringCapital MarketsSME ExchangesLeasingPrivate Equity MarketsCrowdfunding PlatformsLending PlatformsSource:Original figure for this publication.FIGURE 2.2 Composition of Debt Financing for SMEs around the World02468101214Bank loansReceivablesfinancingLeasingFintechsMi

177、nibonds%GDPHICMICTotal Outstanding Debt Volume,2020Source:Original calculations for this publication based on data from International Monetary Fund,Organisation for Economic Co-operation and Development,Asian Development Bank,World Bank,Factoring International,World Leasing Yearbook,Cambridge Centre

178、 for Alternative Finance,Moodys,Bank for International Settlements,and Standard and Poors(S&P).Note:The figure shows the median across countries within income groups.The data in the figure are as of 2020,except for digital banks(within fintech)which are as of 2019.Fintech debt includes only SME loan

179、s from digital banks,big tech,and digital lending platforms.SME bank loan data cover 78 countries(31 HICs,47 MICs),receivables financing data cover 83 countries(HICs:44,MICs:39),leasing data cover 49 countries(HICs:31,MICs:18),digital banks data cover 10 countries(HICs:7,MICs:3),big tech data cover

180、28 countries(HICs:6,MICs:22),and digital platforms data cover 61 countries(HICs:34,MICs:27).Existing evidence suggests that banks are leveraging fintech for SME financing;however,the specific impact of such change has not yet been quantified.Globally,banks have started to adopt fintech solutions thr

181、ough various means,including in-house initiatives;acquisition of fintech firms;and strategic partnerships,such as embedded finance.19 Growing evidence indicates that some banks in selected HICs and EMDEs have expanded their outreach to SMEssee appendix C for selected examples.Nonetheless,more resear

182、ch is needed to reveal the true scope of the evolving landscape.52.THE EVOLUTION OF SME FINANCING2.1.2 Fintech Lenders New financial providers leveraging fintech solutions(“fintech lenders”)have emerged,but they remain relatively small players and have a more active presence in select HICs and MICs.

183、Digital banks represent the largest segment for SMEs among these new financial providers,although their lending volumes remain small when compared to the incumbent banking sector.As of 2020,the total portfolio of digital banks amounted to US$660 billion worldwide,with SME loans estimated at about 10

184、 percent of the total.20 Thus,compared to the overall size of banks portfolios,their importance in SME financing is still limited.21 Digital banks in HICs account for 60 percent of digital bank assets worldwide,those in China for another 30 percent,and the rest in a few large MICs.22 In some countri

185、es,digital banks have become large players in the SME segment.For example,in the United Kingdom,digital banks have established themselves as a dominant force in SME lending since starting operations in 2015.23 Likewise,in China,Mybank has served over 45 million SMEs,which is about one-third of SMEs

186、in China.24 Digital lending platforms have also gained prominence in the SMEs space.25 As of 2020,digital lending platforms had facilitated US$44 billion in debt financing to SMEs globally.26 Akin to trends in digital banks,lending platforms are operating across many EMDEs,but volume-wise,their impo

187、rtance is concentrated in HICs and selected EMDEs.27 While big tech firms are growing players in SME financing,the bulk of their financing is channeled through digital banks or through traditional banks,often under an embedded finance model.28 Estimates indicate that big tech had facilitated about U

188、S$700 billion in loans as of 2020,10 percent of which went to SMEs.29Growing evidence indicates that fintech lenders have been reaching underserved SMEs.For example,compared to banks,digital lending platforms have financed riskier SMEs,according to studies conducted in Germany,the United Kingdom,and

189、 the United States.These studies also show that the lending volumes of digital lenders have been larger where bank coverage has been lower.30 In China,more than three-quarters of SMEs served by digital banks were first-time borrowers.31 Similarly,evidence from a recent World Bank survey shows that f

190、intech lenders across HICs and EMDEs have targeted underserved segments,including SMEs.32 Case studies highlight the use of alternative data and enhanced credit-scoring methods as key factors for fintech lenders greater outreach to SMEs.33Despite their outreach to underserved SMEs,fintech lenders fa

191、ce marked challenges in scaling up operations.Fintech lenders that do not take deposits,such as digital lending platforms,have difficulty accessing funding at competitive rates.Digital banks have struggled to create revenue sources that extend beyond transaction fees.Big tech companies have yet to s

192、ettle on the extent to which their financial activities belong to their core business model and are deployed at scale.2.1.3 Asset-Based FinancingAsset-based financing can be particularly attractive for SMEs as it can mitigate their lack of immovable assets and heightened credit risk by working with

193、alternative sources of collateral.34 Receivables financing,also referred to as factoring,can be an important source of short-term,working capital financing for SMEs.Long payment periods have been a recurring challenge for SME operations.Factoring allows SMEs to use the invoices originated from the s

194、ale of their goods and services to secure short-term financing.Moreover,for financiers,the risk of these transactions is largely based on the credit risk of the(higher quality)buyer,not the credit risk of the SMEs.Another asset-based financial product is leasing,which significantly lowers the credit

195、 risk of a borrower,as the risk for leasing providers is limited to the value of the leased asset itself,whose ownership tends to remain with them until the end of the contract.Leasing provides financing for longer-term,capital investments for SMEs.Research has shown that,indeed,SMEs with limited im

196、movable collateral,who are subject to high information asymmetries,and are thus perceived by lenders as posing a higher credit risk,are more likely to finance investments with leasing.35 SMEs in construction and manufacturing,in particular,have benefited from access to leasing.36Fintech solutions ha

197、ve given a boost to receivables financing,but financing volumes are relatively small in EMDEs.Different types of factoring platforms have emerged,some based on traditional factoring,and others based on reverse factoring.37 Some platforms are on-balance-sheet lenders,akin to a lending institution;oth

198、er platforms are closer to capital markets and simply connect SMEs and investors,thus providing off-balance-sheet financing.These platforms can reduce transaction costs,increase the speed of transactions,and facilitate access to finance for SMEs in remote areas.Platforms,especially in countries that

199、 have implemented e-invoicing,can also reduce the risk of fraud 6BOOSTING SME FINANCE FOR GROWTHand facilitate enforcement as transactions are recorded in a centralized system.Finally,online platforms allow SMEs to build a credit history,which can facilitate access to other forms of financing.These

200、fintech platforms for receivables financing remain relatively small in EMDEs,with financing volumes estimated at US$686 million in MICs in 2020.The global fintech market for receivables financing is currently estimated at US$4.2 billion,which equals about 1 percent of the total receivables financing

201、 market as of 2020.38Fintech has also facilitated leasing,for instance by providing better risk management tools.Digital technologies,such as global positioning systems and machine learning solutions,can make it easier to track and evaluate the state of a leased asset.The emergence of online market

202、auctioneers for used products has improved the liquidity of secondary markets for movable assets in HICs,which allows leasing companies to better manage risks.Asset-based financing is more developed in countries with supportive legal and regulatory frameworks,effective out-of-court enforcement mecha

203、nisms,and robust financial infrastructures,especially credit information systems.39 Asset-based financing requires modern secured transaction laws that can provide efficient mechanisms to constitute security interest.In addition,it requires well-functioning collateral registries,offering cost effect

204、ive usage and easy accessibility(for example,online registries).Recent evidence indicates that robust credit information systems have also played a role in asset-based financing.These markets are thus typically more developed in HICs and a select set of MICs.Receivables financing is particularly wel

205、l-developed in HICs,which account for almost 80 percent of global volumes.40 Upper-middle-income countries(UMICs)account for the bulk of the remaining 20 percent.Factoring volumes for the total market(that is,not just SMEs)surpassed 5 percent of GDP for the median HIC in the sample but were only abo

206、ut 0.8 percent for the median MIC in 2020.Similar patterns are observed in leasing markets:financing volumes for the total market were 2 percent of GDP for the median HIC and 0.65 percent for the median MIC in 2020.412.1.4 Capital Markets Capital markets solutions,such as minibonds and debt funds,al

207、low SMEs to tap into a different set of financiers.42 Access to capital markets not only brings diversification of funding sources to SMEs but also may provide additional benefits.For example,minibond issuers have been able to obtain lower interest rates on their subsequent bank loans.43 Bonds have

208、mostly been issued by medium companies(owing to a de jure or de facto minimum issuance size),whereas debt funds have supported a wider range of SMEs,as these funds can invest in a range of assets(from receivables to SME loans and minibonds).44 Some of these debt funds buy the assets from SME lenders

209、,others originate the assets themselves.Capital markets have also provided SME lenders with indirect mechanisms to support SME financing.Specifically,capital markets solutions have been used by SME lenders to improve their funding structure,allowing them to compete more effectively in credit markets

210、,which in turn can result in an expansion of financing to SMEs,improvements in lending conditions,or both.In many countries,banks(and other SME lenders,to a lesser degree)use capital markets to raise long-term funding through relatively simple instruments,such as plain vanilla bonds.In more sophisti

211、cated capital markets,both banks and other SME lenders have also resorted to instruments more directly tied to their SME portfolios,such as the securitization of their SME loans.Beyond stable macrofinancial conditions,the development of capital market solutions for SMEs typically occurs when certain

212、 preconditions are in place.For example,minibond markets often emerge in countries with relatively well-developed corporate bond markets,whereas debt funds often require a strong asset management industry.Both types of instruments also require a strong base of investors,especially institutional inve

213、stors.Moreover,their development usually requires the implementation of specialized legal and regulatory regimes.Overall,capital market solutions for SMEs are more readily available in HICs and a few large,financially developed,EMDEs.For example,minibond issuances have been concentrated in Europe,an

214、d only a few other countries,such as Argentina,China,Peru,and the Republic of Korea have developed the segment at a more limited scale.Debt funds have grown rapidly over the past 10 years,especially in HICs and some MICs,such as Brazil and Mexico,but only a small fraction of the funds have targeted

215、SMEs.In contrast,plain vanilla issuances by SME lenders can be found across a wider range of EMDEs,as they only require basic corporate bond markets.Other instruments,such as SME loan securitization,remain niche products,even in HICs.4572.THE EVOLUTION OF SME FINANCING2.2 Equity Financing for SMEs2.

216、2.1 Equity Financing for Innovative FirmsAlthough the majority of SMEs rely on debt as their main source of external financing,equity financing can be powerful in spurring innovation.46 Innovative activities are inherently risky and generally entail investments in intangible assets,such as research

217、and development(R&D),that provide limited collateral value.Consequently,these investments can be hard to finance with debt.While equity can fund any type of investment,it often disproportionately benefits firms with investments in such innovative activities.Private markets,especially venture capital

218、(VC),are the main source of equity financing for SMEs;however,they remain small in most EMDEs.47 While the median HIC country has VC investments at around 0.3 percent of GDP per year,such investments stand at about 0.01 percent of GDP(or less)in MICs,and only a handful of EMDEs have markets with gre

219、ater depth(figure 2.3).48 Moreover,fewer firms obtain financing from VC in EMDEs compared to HICs.For example,VC investments did not reach more than 10 companies per million people in a given year in any EMDE country during 201019,whereas among HICs,VC investments often reached more than 80 companie

220、s per million people.VC investments in EMDEs are concentrated in relatively large and mature firms.49 Contrary to popular perception,VC investments have limited reach to startups and young firms,not only in EMDEs,but even in HICs.50 VC arguably plays a more prominent role in funding the next stage o

221、f the innovation cycle,when companies commercialize their innovation.51 In fact,the bulk of VC investments is concentrated in firms that are five years old or older in both UMICs and HICs.52 In addition,VC investments in MICs are concentrated in relatively larger firms than VC investments in HICs.Fo

222、r example,during 201019,firms with more than 350 employees accounted for about 70 percent of the volume of VC investments in MICs compared to 35 percent in HICs.VC investments have focused on a narrow set of high-tech sectors in both HICs and EMDEs.Historically,VC funds have typically funded segment

223、s in which the uncertainty about the viability and commercialization of ideas can be resolved within the time frame of VC financing cycles(typically between 8 and 10 years).53 Overall industry size and performance may also play a role,as they affect not only the risk-return profile of the VC transac

224、tions,but also the exit options for investors.Over the recent past,the focus has been on high-tech sectors,with the top-five segments for global VC investments during 201019 being technology,media,and telecommunications;mobile;software as a service;artificial intelligence and machine learning;and e-

225、commerce.54 These top-five segments accounted for more than 70 percent of the value of VC investments and more than 70 percent of the number of firms that received VC investments,not only in HICs,but also in MICs.Fintech has started to play a role in the financing of innovative firms through crowdfu

226、nding platforms,but these platforms remain markedly small in most EMDEs.While VC funds are dominated by professional investors,crowdfunding platforms have enabled retail investors to fund SMEs directly through equity and quasi-equity instruments.55 Research in HICs suggests that crowdfunding platfor

227、ms are more likely to fund highly innovative,high-risk companies that may otherwise fail to raise capital from VC funds.56 However,whether those companies are able to obtain follow-on funding from other sources and thrive in the long term remains an open question.These platforms have developed mostl

228、y in HICs and a few MICs(for example,Brazil,India,Malaysia,and South Africa).According to Cambridge Center for Alternative Finance(CCAF)data,equity crowdfunding reached US$2 billion globally in 2020,which represents less than 0.1 percent of the VC industry.57The limited institutional investor base a

229、nd the small scale of private markets for equity financing explain,at least in part,the focus of VC investments on larger and more mature firms in EMDEs.58 With a limited range of investment opportunities in smaller markets,the stakes are higher for each individual transaction.Thus,equity investors

230、have incentives to be more risk averse and focus on larger and more mature firms whose viability and credibility are likely to be well established.These credentials also enhance investor exit options.The lack of a robust domestic investor base is another important factor.Although foreign investors c

231、an play an important role for market development,research shows that these investors tend to be less informed about local markets and are more risk averse than domestic investors.Hence,they favor larger and more mature firms.59 For example,VC investments in MIC companies with investor participation

232、from HICs were almost double the size of VC investments with only domestic investors.608BOOSTING SME FINANCE FOR GROWTHFIGURE 2.3 Composition of Equity Financing around the World 0.000.100.200.30PrivateequityVenturecapitalCrowdfundingCapital invested%GDP(2020,median country)HICMIC0.00.10.20.30.40.5H

233、ICMICMarket capitalization%GDP(2021,median country)a.Capital investedb.SME exchangesSource:Original calculations for this publication based on McKinsey,Datastream,and CCAF.2.2.2 Equity Financing for Mature SMEsPrivate equity(PE)funds have reached only a few larger SMEs,and thus have not been a consi

234、stent source of financing for mature SMEs.PE financing,including financing through buy-out and growth equity funds,represented about 0.03 percent of GDP in MICs in 2020,compared to 0.3 percent of GDP in HICs(figure 2.3).While the volume of PE financing is larger than the volume of VC financing,PE ha

235、s funded fewer SMEs as transactions are significantly larger.In 2020,the median transaction size for VC investments in MICs was estimated at US$300,000,while the amount climbed to US$6 million for PE investments.61 Hence,PE financing is typically only a viable source of funds for larger SMEs,which o

236、ften benefit from equity funding to turn their companies around and improve profitability.Over the last 20 years,SME exchanges have emerged in a wide range of economies,but less than half of these exchanges remain active.The traditional public equity markets have not successfully attracted SMEs.62 D

237、isclosure and corporate governance requirements are costly,compliance is difficult,and in many cases,SMEs are reluctant to open their capital to third parties.Furthermore,the limited liquidity of SMEs,the lack of research coverage,and the small ticket size hamper investor interest.Consequently,speci

238、alized SME exchanges have emerged and are often grounded on lighter listing requirements than those of the traditional public equity markets.Their strategies have varied.Some SME exchanges target mature,profitable SMEs(for example,the Alternative Investment Market in the United Kingdom,Alternext in

239、France,and the National Stock Exchange and the BSE in India),while others brand themselves as hubs for high-tech companies(for example,KOSDAQ in Korea and Mothers Exchange in Japan).Some of the latter set seem to have created positive spillovers for the VC industry,arguably by enhancing the exit opt

240、ions for investors.63(See appendix C.)There are currently 90 SME exchanges worldwide,although only about 40 percent of them,in HICs and large MICs(such as China,in particular),are active.However,a more complex set of challenges affects equity financing in EMDEs.The underdevelopment of both private a

241、nd public equity markets in EMDEs points to challenges in expanding equity markets more broadly.64 Such challenges include a thin pipeline of companies ready to invest;a shallow investor base;and deficiencies in the enabling environment for equity financing,including inadequate investor protection(f

242、or example,for minority shareholders)and corporate governance issues.6592.THE EVOLUTION OF SME FINANCING2.3 SummarySMEs continue to face both debt and equity financing gaps;addressing these gaps will require deliberate government intervention.While progress has bridged some of these challenges,espec

243、ially in certain MICs,substantial gaps remain particularly marked in LICs.Against this backdrop,governments in EMDEs should continue to prioritize access to finance for SMEs.However,the evidence presented in this chapter highlights the need to revisit the toolkit of interventions,both for the enabli

244、ng environment and for targeted interventions.This revised toolkit should place increased emphasis on alternative sources of debt financing and the role of equity financing for innovation and growth.It should also reflect the new environment in which SME financing is taking place,especially regardin

245、g the increased use of technology.Furthermore,when determining the range of interventions to deploy,governments should be mindful of the preconditions necessary to develop specific types of financing solutions.Governments should also consider the role that a stable macroeconomic environment and robu

246、st institutions play in fostering the development of a vibrant financial sector.These issues will be covered in the next chapters.10BOOSTING SME FINANCE FOR GROWTHCHAPTER 3 A Road Map for Enabling SME FinanceAs a starting point,governments should focus on urgently completing a core enabling environm

247、ent agenda to support SME financing.While empirical research highlights the importance of a wide range of issues for SME financing,from economic fundamentals to solid institutions,governments should continue to prioritize components of the enabling environment that can materially impact SME financin

248、g.66 Implementing this agenda carries very limited fiscal costs,yet the benefits could be sizeable.The core agenda pursued by many EMDEs for the last 20 years remains highly relevant,but enhancements should be pursued,and new areas of attention added.The core policy agenda has focused on three main

249、components:(a)the development of credit-reporting systems;(b)the implementation of frameworks for secured transactions along with collateral registries;and(c)the implementation of effective insolvency frameworks.These core components aim to mitigate key market failures and challenges that affect SME

250、 financing,in particular their opacity(that is,lack of reliable financial information),their lack of“suitable”collateral,and their higher credit risk(perceived and real).Lessons learned from policy implementation in HICs and EMDEs reinforce the relevance of these components,but also reaffirm the nee

251、d to deepen reforms.In addition,new areas should be brought to the core agenda,focusing on the development of an enabling environment for alternative lenders and for equity financing.For purposes of this report,alternative lenders are any lender that is not a traditional bank.67 As these reforms are

252、 implemented,other areas will require updating,including a greater focus on consumer protection and competition.Finally,the enabling environment to leverage financial technology constitutes a cross-cutting issue.The following road map,which is consistent with the 2022 Updated G20/OECD High-Level Pri

253、nciples on SME Financing,provides guidance specific to EMDEs regarding key actions needed to urgently implement this extended core agenda while recognizing that country context matters.3.1 Action 1.Continue Enhancing the Availability of SME Credit InformationCredit reporting systems can mitigate cri

254、tical market failures that affect SME financing,especially information asymmetries between lenders and SMEs,by providing objective information that lenders can use in their credit risk assessment processes.These systems also allow SMEs to build a credit history that they can use as“reputational coll

255、ateral”to access formal credit outside established lending relationships.Existing evidence has positively linked credit reporting systems with SME lending.68Governments in EMDEs should continue to actively promote the development of effective credit reporting systems.Removing legal obstacles for the

256、 exchange of credit information is the first step toward developing these systems.Still,experiences in EMDEs indicate that,in many cases,governments need to establish the necessary incentives for such information exchange to take place.Depending on country context,such incentives could include manda

257、tory reporting.In countries where credit reporting systems do not 113.A ROAD MAP FOR ENABLING SME FINANCEdevelop organically,governments should actively engage in supporting their creation,as many EMDEs have done.69 In addition,governments have a key regulatory role:(a)ensuring a level playing field

258、 in information access for new entrants;(b)ensuring open and equal access to credit reporting systems for regulated and unregulated lenders;(c)identifying and eliminating anticompetitive pricing policies;and(d)preventing the formation of closed user groups.70 Once credit reporting systems are establ

259、ished,governments should focus on ensuring the inclusion of alternative lenders and on enhancing the availability of alternative data.Regarding the former,banks are often reluctant to extend information sharing arrangements to alternative lenders.In addition,these lenders may need technology upgrade

260、s to fulfill reporting obligations.Thus,governments can play a critical role in expanding the participation of alternative lenders in credit reporting systems via regulation and capacity building initiatives.Regarding the latter,research indicates that alternative information,such as information on

261、payments(for example,from utility bills and other financial transactions)and information on internet usage,can help capture the footprint of underserved SMEs,allowing them to establish their creditworthiness versus potential lenders.71 Specific elements of alternative data to be covered vary dependi

262、ng on country context.For example,in Guyana,credit bureaus have access to utility data;in Kenya,they have access to mobile payments data;and in the United Kingdom,they have access to information on house rents.The use of such data,however,raises concerns about data privacy and data protection when i

263、ndividuals personal information is involved.72 Governments should thus foster the responsible use of alternative data by enacting the necessary regulations and guidance.73Governments should also explore expanding access to government data to lenders.Government agencies hold a wide range of data rele

264、vant for SME financing,including data on business registration,tax,and land records.Accessing such data can be time-consuming and costly.Improving access in an efficient manner,such as via automated,online interfaces,while supporting their inclusion in credit-reporting systems(for example,in credit

265、bureaus),could substantially enhance the information environment for SME financing.For example,in India,automated access to government data platforms has enabled banks to approve MSME and personal loans online in under an hour,down from 20 to 25 days in the past.74 In Argentina,the Ministry of Produ

266、ction is implementing a digital platform that will consolidate financial and economic information on SMEs,including financial information from the tax authorities.SMEs will control who has access to this information,and they will be able to provide it to regulated financial institutions.3.2 Action 2

267、.Complete the Enabling Environment for Asset-Based Financing,Including the Implementation of Movable Collateral RegistriesAsset-based financing remains limited in EMDEs,despite legal reforms aimed at facilitating its use.As summarized in chapter 2,asset-based financing brings distinctive benefits to

268、 SMEs,as it addresses critical challenges that affect their financing,including the lack of“suitable”collateral and credit history.This is why,during the last two decades,governments in EMDEs have worked on implementing legal frameworks for secured transactions(for example,factoring and leasing),alo

269、ng with the implementation of collateral registries,especially for movable assets,that formalize and provide transparency to lenders claims thus helping to lower the cost of defaults and the risk of fraud.75 However,several challenges continue to affect the use of asset-based financing.There are obv

270、ious benefits of real-estate collateraltitled propertywhich include stable pricing and deep secondary markets.For other assets,such as intellectual property,reliable asset valuation and secondary market liquidity are harder to assure.Other key challenges hindering the development of asset-based fina

271、ncing include a lack of intermediaries familiar with this type of instrument,and thus,a corresponding lack of appropriate risk management mechanisms.Finally,in many countries,the legal frameworks and the institutional arrangements supporting such transactions are still incomplete.The latter type of

272、challenges is more profound in jurisdictions with civil law systems,which have been more reluctant to embrace a number of fundamental approaches of modern secured transactions legislation,such as notice-based registries and extrajudicial enforcement.76 Furthermore,in some EMDEs there are still limit

273、ations in the type of assets that can be used as collateral for debt financing.In addition,in some EMDEs,collateral registries operate with obsolete 12BOOSTING SME FINANCE FOR GROWTHinformation technology systems or are paper-based,making it costly for potential lenders to obtain information.In some

274、 EMDEs,there are separate registries for different types of assets,and the lack of interoperability makes more difficult for potential lenders to conduct complete searches of the status of SME assets.Governments should review the progress and challenges in their respective countries in completing th

275、e enabling environment for asset-based financing.The implementation of modern secured transactions laws is particularly important,especially the inclusion of a wide range of assets as acceptable collateral,and the adoption of notice-based registries and effective out-of-court mechanisms to execute c

276、ollateral.As explained above,for some EMDEs,other important measures might include moving to online centralized(or interoperable)collateral registries and covering movable assets,which can help lower transaction costs and speed up the constitution of liens.Governments should also consider enhancing

277、capacity building for financial intermediaries.Finally,cross-country experiences highlight the benefits of coordinating this agenda with other government initiatives.Two notable areas for policy support are(a)the implementation of electronic receipts,which can support deeper markets for receivables

278、financing,and(b)government procurement initiatives,which can further the development of both receivables financing and purchase order financing.Appendix C provides examples of how some countries in Latin America have effectively leveraged e-invoicing to foster receivables financing.3.3 Action 3.Over

279、haul Insolvency RegimesEffective and efficient insolvency regimes can improve SME access to finance.A robust insolvency regime is essential for both the financial and private sectors.Growing evidence indicates that insolvency regimes provide lenders with greater certainty and predictability in the r

280、ecovery of defaulted loans,thus allowing them to price the risk of defaults more efficiently.Similarly,entrepreneurs are more willing to enter the market when they are not putting their entire personal fortunes at risk.77 Moreover,effective insolvency systems enable the reorganization of viable busi

281、nesses78 and ensure that non-viable businesses can quickly exit the market,allowing the reallocation of assets to more productive firms.Yet,globally,the development of insolvency regimes still requires significant progress.A key lesson learned from the experience of HICs and EMDEs is that“ordinary”r

282、egimes do not usually work for SMEs,as such regimes usually focus on the challenges of insolvency for large corporations.79 The COVID-19 pandemic has provided impetus to reforms aimed at developing specialized regimes for SMEs.In addition,the World Bank Insolvency and Creditor Debtor Regimes Princip

283、les,revised in 2021,provides updated global guidance.The principles encourage countries to(a)lower the barriers to access and encourage early utilization of out-of-court restructuring procedures and hybrid procedures(that is,those conducted largely out of court,with minimal court intervention)and(b)

284、simplify in-court insolvency proceedings to reduce cost and limit complexity,including cutting procedural steps.Jurisdictions such as Australia,Chile,Spain,and the United States have implemented these types of frameworks.3.4 Action 4.Complete the Enabling Environment for Alternative Sources of Finan

285、cingBanks will remain a key source of external financing for SMEs;therefore,their regulation remains a critical element of the enabling environment for SME financing.Prudential regulation introduced with the Basel III reforms increased the capital requirements for banks on their SME loan portfolios,

286、although the final version contains a favorable treatment for specific sets of SME loans that EMDEs can apply.Research has not found evidence of persistent material negative impact of this framework on SME lending,albeit the impact differs across SMEs and countries(see appendix C).In light of the le

287、ssons learned from previous crises about the importance of prudential regulation for the overall health of the banking sector,EMDEs are encouraged to pursue the implementation of 133.A ROAD MAP FOR ENABLING SME FINANCEregulatory frameworks that are consistent with the Basel standards.But banks alone

288、 cannot address the SME credit gap.As summarized in chapter 2,alternative lenders can fulfill important gaps in the SME financing space because(a)their business models are directly oriented toward underserved segments(for example,microfinance institutions;MFIs),(b)the type of financing they offer is

289、 more accessible to SMEs(for example,asset-based financing for SMEs that lack adequate collateral or credit history),or(c)they adopt different credit assessment methodologies(for example,fintech lenders leveraging big data).Thus,it is critical for EMDEs to ensure that the enabling environment suppor

290、ts the development of alternative lenders.Table 3.1 provides a stylized view of the necessary elements of the enabling environment for different alternative lending sources,along with the preconditions for their scalability.TABLE 3.1 Key Sources of Alternative Finance in EMDEsTypeWhere alternative l

291、enders are likely to developKey preconditions for scalabilityKey enabling environmentFactoring and leasingLICs and MICs,but more likely to develop in MICs Availability of long-term financing that supports the funding of financial providers Modern secured transactions law,including notice-filing coll

292、ateral registries and effective out-of-court enforcementMicrofinance institutions and cooperativesLICs and MICs Availability of long-term financing that supports the funding of financial providers Differentiated regime for deposit-taking versus non-deposit-taking financial institutions,with proporti

293、onate requirementsDigital banksLICs and MICs,but more likely to develop in MICs Enabling environment for digital financial services(DFS)Reforms to banking licensing requirements(mainly to eliminate the need for physical presence)On-balance-sheet fintech lending platformsLICs and MICs Enabling enviro

294、nment for DFS Availability of long-term financing that supports the funding of financial providers No additional framework beyond the existing one for consumer lending institutionsOff-balance-sheet fintech lending platforms and debt-based platforms LICs and MICs,but more likely to develop in MICs En

295、abling environment for DFS Availability of a robust investor base(retail and overtime institutional)Exclusion of lending and debt-based crowdfunding from the requirements imposed in public offering regulations under specific circumstances Specialized licensing regime for the platforms,with proportio

296、nate requirementsBond issuances by SME lendersMICs,and to a lesser extent,financially developed LICs “Basic”corporate bond markets;credit rating services;robust institutional investor base No additional specialized framework Issuances rely on the basic regime for public and private offers,including

297、the regulatory framework for CRAs SME loan securitizationMICs Well-developed corporate bonds markets Robust credit rating services Robust institutional investor base Legal structures that ensure bankruptcy remoteness Regulatory framework for securitization(emphasis on standardization,disclosure,and

298、retention requirements)Regulatory framework for CRAs14BOOSTING SME FINANCE FOR GROWTHTypeWhere alternative lenders are likely to developKey preconditions for scalabilityKey enabling environmentMinibonds issued by SMEsMICs Well-developed corporate bonds markets Robust credit rating services Robust ba

299、se of high-net-worth individuals Vehicles to pool bonds and make them attractive to institutional investors Proportionate regime for SME issuances(that is,simplified offering documents,less frequent periodic reporting,and a discrete list of material events)Proportionate listing requirements Potentia

300、l reforms needed to institutional investors regulations(especially if issued under private offering)Regulatory framework for CRAsSME debt fundsMICs Well-developed mutual fund industry Established pipeline of SME assets(minibonds,loans,receivables)Mainly focused on sophisticated investors(professiona

301、l and institutional investors)Specialized regime for debt funds,allowing investments in alternative assets,including loans and receivables Greater flexibility to funds available only to professional investorsSource:Original table for this publication.For many EMDEs,strengthening the regulation of MF

302、Is(and cooperatives)should be a priority.As will be discussed in chapter 5,microfinance institutions and cooperatives are key intermediaries that provide financing to underserved sectors,including agriculture SMEs(agri-SMEs)and WSMEs.However,in some EMDEs,they are not subject to financial regulation

303、,whereas in others they are subject to very stringent requirements.Thus,for many EMDEs,ensuring that MFIs and cooperatives that are deposit-taking institutions are subject to financial regulation,under a proportionate regime,should be a priority.80Selective reforms based on country context are neede

304、d to ensure that specialized fintech lenders can operate on a level playing field.81 A key reform pertains to potential changes to the licensing regime of banks to allow the entrance of digital banks.This might entail,for example,adaptations to physical presence requirements.Economies like Brazil;Ho

305、ng Kong SAR,China;Malaysia;Mexico;Singapore;and Thailand have revised and provided guidance on the application of the licensing regime of banks to digital banks.82 In addition,governments should consider the creation of licenses for new types of financial intermediaries.Notable examples include the

306、lending platforms discussed in chapter 2,whereby such platforms function as intermediaries bringing together SMEs,and investors.Approaches have varied across countries,but in the European Union and the United States,specialized licenses are being created to allow these new entities to provide such s

307、ervices under proportionate requirements,in addition to traditional securities intermediaries and exchanges.83 Research indicates that many platforms operate in more than one jurisdiction,which also highlights the importance of international coordination and cooperation.The set of specific reforms f

308、or a given country will depend,in particular,on the level of development of the respective countrys financial sector.For instance,factors such as the existence of a robust base of retail and institutional investors plays a role in the development of these platforms.Therefore,they are more likely to

309、thrive and scale up in MICs,where the broader enabling conditions for their operation are likely to be more developed.Thus,governments should be mindful of their own country contexts in prioritizing these reforms.MICs with relatively well-developed capital markets should consider the implementation

310、of an enabling environment to foster capital markets solutions for SME financing.Capital markets solutions can help SME lenders obtain long-term funding,allow SMEs to diversify their funding sources,and can also lead to additional benefits in terms of improved lending conditions.However,as discussed

311、 in chapter 2 and summarized in table 3.1,capital markets solutions require a range of additional preconditions to develop.Authorities need to be cognizant of such preconditions when determining how to prioritize the development of the enabling environment for these solutions.153.A ROAD MAP FOR ENAB

312、LING SME FINANCE3.5 Action 5.Foster CompetitionIncreased fintech adoption and the emergence of alternative lenders could bring changes in market structure and competition dynamics that negatively impact SME financing.84 For banks,leveraging fintech can lower the outreach costs to SMEs and expand the

313、 banking sectors appetite for the SME segment.85 In the absence of new entrants,technology-driven economies of scale and scope could lead to increased market concentration.External competition from challenger digital banks and other specialized fintech lenders(including big tech firms)could alter ma

314、rket structure.As summarized in chapter 2,in some countries these non-bank financial players are partnering with banks rather than competing with them,which could exacerbate market concentration effects.86 In turn,this could result in the benefits of fintech accruing to financial institutions,rather

315、 than leading to a material impact on SME financing.Hence,it is critical to foster competition,ensuring a level playing field across the different providers of financing to SMEs.87 Important aspects to watch are the following:entry requirements,which should be proportionate to the undertaken risks,a

316、nd thus should not constitute an entry barrier for alternative lenders;accessibility to credit information,whereby coverage should be extended to alternative lenders;and extension of the framework for consumer protection to new types of lenders.Depending on country context,governments should conside

317、r“open finance”reforms aimed at allowing third parties,acting on behalf of customers,to directly access information held by financial institutions and initiate transactions.88 Open finance has the potential to deepen financial services and foster innovation and competition in the financial sector by

318、 allowing the development of new business models as well as new service providers.Governments have started to acknowledge this potential,while recognizing the opportunities that open finance creates to streamline access to finance for SMEs and promoting financial inclusion.Several jurisdictions have

319、 implemented,or are in the process of implementing,open finance frameworks.The United Kingdom and European Union are at the forefront of this agenda,with larger EMDEs,like India,Mexico,and Trkiye,following suit.Governments in both LICs and MICs should consider additional innovative interventions tha

320、t foster competition and can potentially improve SME access to financing.An example of an innovative intervention is the development of electronic platforms to bring financial intermediaries together to compete for SME credit.Development financial institutions(DFIs)in Colombia,India,and Mexico have

321、developed and operated such platforms.While the financial institutions could create such platforms themselves,active participation by DFIs may be necessary to overcome coordination failures among financial institutions.Other types of innovative measures that do not require public funding could also

322、be considered.The British Business Bank provides one such example,as it requires the largest banks to provide information on rejected SME loans to alternative platforms for the consideration of alternative lenders.Appendix C provides additional details.3.6 Action 6.Develop the Enabling Environment f

323、or Equity FinancingAs discussed in chapter 2,equity financing is critical for innovation and growth.Table 3.2 summarizes the important features of the enabling environment needed for specific equity financing solutions as well as key preconditions.As a first step,governments in EMDEs must ensure tha

324、t the legal and regulatory framework for capital markets provides space for SMEs to raise funding in the private markets.This can be achieved through exemptions that allow companies to tap equity investors without triggering the obligations of disclosure and corporate governance associated with publ

325、ic markets under specific circumstances(for example,where capital raising is largely confined to professional investors or the amount raised is limited).89 In addition,governments should develop a framework for the private fund industry.In countries with a well-developed domestic institutional inves

326、tor base,governments should also determine if changes are needed to their investment regulations,such as pension funds,to allow them to invest in this type of asset.90 In tandem,governments should consider initiatives aimed at enhancing their capacity to make these investments.Countries with a stron

327、g foreign investor base also need to ensure that their foreign direct investment laws do not create barriers or cumbersome procedures that stifle financing from foreign investors.Finally,taxation can become a competitive issue versus other jurisdictions.16BOOSTING SME FINANCE FOR GROWTHDepending on

328、country context,governments should consider developing the enabling environment for equity crowdfunding.Equity crowdfunding platforms provide SMEs access to retail investors under a streamlined disclosure regime.The challenge for EMDEs is to strike a balance between easing SME access to a wider rang

329、e of investors while also providing adequate investor protection.Many countries have addressed this tradeoff through a combination of measures that include limits to the amount companies can raise along with limits to the amount that investors can fund,as well as due diligence obligations for the pl

330、atforms.Nonetheless,existing evidence suggests that equity crowdfunding is more likely to thrive and scale up in countries that already have relatively well-developed equity markets.91 Thus,governments need to be mindful of country context in prioritizing the development of these frameworks.EMDEs wi

331、th well-developed equity markets should develop the enabling environment to support SME listing.The key elements in the enabling environment are proportionate disclosure and corporate governance requirements for SME offerings.92 But actions by the exchanges to support SME listings are also needed.Su

332、ch actions include streamlining performance,disclosure,and governance listing requirements and lowering listing costs.Some of the more successful SME exchanges have implemented a wider range of measures that seek to address investors concerns about the quality of SME listings,the availability of inf

333、ormation,and secondary market liquidity.Among the adopted measures are the following:requirements for the participation of specialized intermediaries to support companies compliance with listing obligations;support to research coverage,in some cases with subsidies for a number of years;and adoption of market-making requirements.Finally,cross-country experience indicates collective investment vehic