Crossing the divide: a joint framework for SME financing

Authors: Apala Bhattacharya*, Lee Kuan Yew School of Public Policy, Teshura Nair*, National University Of Singapore, Marina Kaneti, National University of Singapore
Topics: Development, Asia, Africa
Keywords: SME financing, private investment, development financial institution, finance framework
Session Type: Paper
Day: 4/5/2019
Start / End Time: 9:55 AM / 11:35 AM
Room: Capitol Room, Omni, East
Presentation File: No File Uploaded

In today’s economic environment, finance for Small and Medium Enterprises (SMEs) is critical because SMEs are key drivers for competitiveness and growth in the economy. They contribute significantly to the GDP of many countries by providing employment and promoting inclusive growth. However, rapid development in emerging markets is hindered by the financing gap for SMEs.

This paper first examines the current landscape for SME financing, and identifies supply and demand side limitations across different regions. We also chart the current landscape, divisions, and critical roles of both private partners and Development Financial Institutions (DFI) in SME financing. Third, and using a case-study approach, we contrast the characteristics of emerging market economies with the highest or lowest levels of private investment in financing development in East Asia and Pacific (EAP), South Asia Region (SAR) and Sub-Saharan Africa (SSA). Based on our analysis we propose a new finance framework in which DFIs and private investor’s roles are combined, to provide a comprehensive package of financing that targets economies with both a top-down and bottom-approach.

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