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OECD released two new reports on the small and medium-sized enterprises (SMEs) which emphasize that the SMEs are fundamental for inclusive growth and jobs, but they need to broaden their sources of finance in order to reduce their vulnerability to volatile credit market developments.
Both studies– “Financing SMEs and Entrepreneurs 2015: An OECD Scoreboard” and “New approaches to SME and entrepreneurship financing: Broadening the range of instruments” – underline that alternative funding options must be developed and promoted to support investment. The reports are presented to G20 Finance Ministers in Washington to present policy strategies for SMEs which are key priorities of Turkey’s G20 Presidency.
The fourth edition of “Financing SMEs and Entrepreneurs 2015: An OECD Scoreboard” monitors SMEs’ and entrepreneurs’ access to finance in 34 countries over the period 2007-13, across an expanded array of indicators, including debt, equity, asset-based finance and framework conditions. These are complemented by an overview of recent developments in public and private initiatives to support SME finance, and a special focus on non-performing loans.
The report aims to provide a comprehensive framework for policy makers and other stakeholders to evaluate the financing needs of SMEs.
The Scoreboard’s tracking of government policies to facilitate SMEs’ access to finance shows a new emphasis on innovative approaches – notably with respect to the development of alternative financing instruments. Although credit conditions have generally eased, they remain tight, especially for SMEs.
“New approaches to SME and entrepreneurship financing: Broadening the range of instruments” highlights the fact that traditional bank finance poses challenges to SMEs, in particular to newer, innovative and fast-growing firms with a higher risk profile.
The report considers that diversified funding sources for SMEs can better serve the needs of firms at different stages of their life cycle, as well as help to mitigate systemic risk, strengthen the economy’s resilience to critical shocks and foster new sources of growth.
The report indicates that it is now essential to address the obstacles that are limiting SMEs’ use of a broader range of financial instruments by:
- Addressing the SME skills gap in finance;
- Designing regulation that balances financial stability, investor protection and the development of innovative financing channels for SMEs;
- Creating information infrastructures to improve credit risk assessment;
- Increasing participation of private actors in SME finance.
Remarks by Angel Gurría, Secretary-General, OECD at the reports` presentation
Press-release at the OECD web-site