According to the OECD’s recently published a report titled Financing SMEs and Entrepreneurs 2019: An OECD Scoreboard, the landscape for SME financing has evolved significantly since the financial crisis 10 years ago. Credit availability has gradually recovered in many countries, as interest rates have generally come down and payment delays have declined.
As credit conditions have improved, in recent years, we have also seen a significant use of alternative sources of finance for SMEs and entrepreneurs: financial instruments such as leasing, factoring and equity crowdfunding have seen volumes rise, contributing to the diversification of financial instruments and sources for SMEs.
The OECD report covered 46 countries across the globe and shows that despite the positive trends, there are very large cross-country variations. For instance, in countries that were most affected by the financial crisis, SME access to financing is still struggling to recover. There is also considerable variation in the uptake of instruments such as venture capital investments and online alternative finance; with potential for countries will less developed markets to expand these further.
SME finance remains high on government agendas around the globe. The report highlights for emerging policy trends:
- Credit guarantees are being expanded in scale and volume. One common objective is to better target specific SME segments, such as innovative firms, start-ups or women entrepreneurs.
- Governments have been focusing on addressing payment delays, for example, by introducing payment codes and e-invoicing systems.
- Improvement in regulatory frameworks and introducing targeting policies to supports Fintech developments, such as equity crowdfunding and peer-to-peer lending.
- Increased support for the venture capital industry, mainly through the establishment or expansion of public funds co-investing with private sectors.
SMEs need access to a range of financial instruments in order to unleash their full potential to contribute to inclusive economic growth. The report highlights that, in this regard, several macro-economic, trade and financial risks could cloud the positive outlook or reverse recent improvement.