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Facilitating SME Financing through Improved Credit ReportingThe general principles for credit reporting were issued by the World Bank in September 2011. Since then, the World Bank and the international committee on credit reporting (ICCR) have been leading efforts towards the implementation of the general principles worldwide. This report is one of the concrete outputs of the work following the general principles. It addresses one of the most significant problems that limit the ability of most small and medium enterprises (SMEs) around the world to obtain adequate external financing to underpin their productive activities: information asymmetries. Creditors assess the creditworthiness of credit and loan applicants based on two basic criteria: ones financial capacity or ability to repay a loan, and ones willingness to repay the loan. A credit reporting system s (CRS) basic objective is to address information asymmetries, which is crucial for determining repayment capacity and repayment willingness. Credit reporting can therefore be extremely valuable to creditors for enhanced, fact-based credit risk assessments, and in this sense can also be seen as a tool to facilitate access to financing, including by SMEs. The main objective of this report is therefore to identify actions that can be undertaken by authorities and other relevant policy makers to improve the flow of data and other relevant credit information on SMEs to creditors through CRS. For this purpose, the report first analyses the overall status of credit reporting activities in connection with SMEs.
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Scaling-Up SME Access to Financial ServicesSmall and Medium Enterprises (SMEs) play a major role in economic development, particularly in emerging countries, but access to finance remains a key constraint to SME. In the light of the new understanding of the SME finance challenges that this report synthesizes, the Financial Inclusion Experts Group (FIEG) makes key recommendations for the G-20 leaders, in order to achieve a global scale-up of SME access to financial services in the developing world. The G-20 FIEG SME Finance Sub-Group executed a global SME Finance stocktaking exercise with various SME finance models to establish best practices in SME Finance.The report concludes that, given the fragmented SME finance data space, the G-20 has a unique opportunity to lead the collaborative effort on improving the availability and quality of SME finance data globally. This can be achieved through encouraging and coordinating the data collection efforts at regional, national, and global levels conducted by a multitude of sources including national governments/agencies and international organizations and effectively addressing the data collection challenges along the way to ensure continuity of these efforts moving forward.
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Scaling-Up SME Access to Financial Services in the Developing WorldSmall and medium enterprises (SMEs) play a major role in economic development, particularly in emerging countries. Access to finance remains a key constraint to SME development in emerging economies. Closing the credit gap for formal SMEs will be less daunting than for informal SMEs. The SME finance gap is the result of a mismatch between the needs of the small firms and the supply of financial services, which typically are easier for larger firms to access. Deficiencies in the enabling environment and residual market failures have motivated government interventions to foster SME access to financing. The stocktaking exercise confirms the rise in various parts of the world of specific business models aimed at providing financial services to SMEs in a cost-effective manner. Effective SME financing models can be implemented in different country and market environments, but greater outreach is achieved in the most developed environments for the financial sector. Although SME banking and microfinance models are successfully being rolled out in an increasing number of countries and regions, equity financing remains a challenge in developing economies. The role of international finance institutions (IFIs) and development finance institutions (DFIs) to foster SME financing in the developing world has been significant so far. Increasing access to finance can only be successful if qualitative aspects are taken into account.