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New financing instruments for long-term investments of SMEs The case of Peru

By Joschka Greve, Markus Geibel, Gundula Weitz, Joana Henseler, Petra Schmidt and Bonn (Germany) Deutsches Institut fuer Entwicklungspolitik gGmbH

Abstract

'The significant role played by small and medium sized enterprises (SMEs) for growth and employment is undisputed in industrialized and developing countries alike and has been documented by numerous studies. If the development potential of this business segment is to be harnessed, it is essential that SMEs have access to adequate financing. In capital markets SMEs are faced with a number of company-sized related features of financing, e.g. serious information deficits. This situation entails a number of financing-related disadvantages that may mean higher costs for capital, or indeed wholly exclude SMEs from access to investment capital. In developing countries provision of long-term financial resources is a source of major problems. While access to the short-term capital needed to finance current assets has been improved decisively by the development of specialized finance institutions in recent years, SMEs continue to be hampered by a chronic lack of financial resources tailored to their specific investment needs. This often means that potentially profitable projects are not realized, the consequence being stagnation of company development. The use of alternative financing instruments with quasi-equity or equity-substituting features has proven helpful in situations where access to bank loans is problematic. Positive experiences made in industrialized countries indicate that venture capital and leasing are instruments that hold considerable promise for overcoming the bottleneck in access to long-term capital, and this approach is being actively promoted by bi- and multilateral development institutions. Based on the example of Peru, the present study looks into the questions a) whether the above named instruments are suited to financing the investments of SMEs in developing countries and b) what conditions have to be met to ensure that venture capital and leasing are used in a manner suited to the specific needs of the target group. Between February and April 2002 the authors of the present study conducted a comprehensive survey aimed at answering these questions. The interview partners included potential investors of venture capital active in the Peruvian investment market and leasing operators that offer services to larger companies. Furthermore, 38 SMEs from two industries were interviewed with a view to assessing the financing constraints faced by Peruvian companies and to determining their views on possible alternative means of financing. The survey also included complementary interviews with private-sector experts and representatives of public- sector institutions.' (extract)Die signifikante Rolle kleiner und mittlerer Unternehmen fuer Wirtschaftsentwicklung und -wachstum ist unbestritten und durch zahlreiche Studien belegt. Um so dringlicher stellt sich die Frage nach der Finanzierung dieser Unternehmen. Die vorliegende Studie analysiert die Kapitalmarktsituation insbesondere fuer langfristige Kredite am Beispiel des Entwicklungslands Peru. Waehrend institutionelle Strukturen fuer kurzfristige und kleinere Kredite in Peru hinreichend vorhanden sind, ist ein chronischer Mangel an Kapital fuer laengerfristige und riskantere Investitionen zu konstatieren. Haeufig koennen daher vielversprechende Projekte nicht realisiert werden, was wiederum zur Stagnation der Unternehmen fuehrt. Die Autoren suchen und diskutieren daher alternative Formen von Finanzierungsinstrumenten vom Venture-Kapital ueber Leasing bis hin zum bi- und multilateralen Aufbau von Entwicklungsinstitutionen. Um diese Moeglichkeiten zu testen, wurde 2002 eine Befragung von Unternehmern, Investoren und Experten durchgefuehrt. Die Moeglichkeiten zur Ueberwindung der finanziellen Restriktionen werden von den meisten Betroffenen inzwischen gesehen und aktiv angegangen. (ICAUebers)German title: Neue Finanzierungsinstrumente fuer langfristige Investionen in kleinen und mittleren Unternehmen: der Fall PeruSIGLEAvailable from <a href=http://www.die-gdi.de/die target=NewWindow>http://www.die-gdi.de/die</a> homepage.nsf/6f3fa777ba64bd9ec12569cb00547f1b/fa66ed1ab3b8efd6c1256ce100431e37/$ FILE/Schmidt-New%20FinancingB-4-03.pdf / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman

Topics: 05J - Political science, public administration, 05R - Sociology, social studies, welfare studies, social services, 05D - Economics, economic theory, DEVELOPING COUNTRY, PROMOTION OF DEVELOPMENT, SMALL-SCALE BUSINESS, MEDIUM-SIZED FIRM, FUNDING, CAPITAL MARKET, PERU, ALTERNATIVE, INVESTMENT, CREDIT MARKET, LENDING, CREDIT POLICY, ECONOMIC GROWTH, BANKING, JOINT VENTURE, LEASING, ANDES REGION, SOUTH AMERICA, LATIN AMERICA
Year: 2003
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Provided by: OpenGrey Repository
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