ADB–OECD Study on Enhancing Financial Accessibility for SMEs: Lessons from Recent Crises

During the era of global financial uncertainty, stable access to appropriate funding sources has been much harder for small and medium-sized enterprises (SMEs). The global financial crisis impacted SMEs and entrepreneurs disproportionately, exacerbating their traditional financing constraints. The financial conditions of many SMEs were weakened by the drop in demand for goods and services and the credit tightening. The sovereign debt crisis that hit several European countries contributed to further deterioration in bank lending activities, which negatively affected private sector development. The global regulatory response to financial crises, such as the Basel Capital Accord, while designed to reduce systemic risks may also constrain bank lending to SMEs. In particular, Basel III requires banks to have tighter risk management as well as greater capital and liquidity. Resulting asset preference and deleveraging of banks, particularly European banks with significant presence in Asia, could limit the availability of funding for SMEs in Asia and the Pacific. Lessons from the recent financial crises have motivated many countries to consider SME access to finance beyond conventional bank credit and to diversify their national financial system. Improving SME access to finance is a policy priority at the country and global level. Poor access to finance is a critical inhibiting factor to the survival and growth potential of SMEs. Financial inclusion is thus key to the development of the SME sector, which is a driver of job creation and social cohesion and takes a pivotal role in scaling up national economies. The Asian Development Bank (ADB) and the Organisation for Economic Co-operation and Development (OECD) have recognized that it is crucial to develop a comprehensive range of policy options on SME finance, including innovative financing models. With this in mind, sharing Asian and OECD experiences on SME financing would result in insightful discussions on improving SME access to finance at a time of global financial uncertainty. Based on intensive discussions in two workshops organized by ADB in Manila on 6–7 March 2013 and by OECD in Paris on 21 October 2013, the two organizations together compiled this study report on enhancing financial accessibility for SMEs, especially focusing on lessons from the past and recent crises in Asia and OECD countries. The report takes a comparative look at ADB and OECD experiences, and aims to identify promising policy solutions for creating an SME base that is resilient to crisis, from a viewpoint of access to finance, and which can help drive growth and development

A legacy handbook for business support

Legacy Handbook reviewing emda's experience of business support activity. Identifies key achievements and draws out lessons learned that may be relevant to successor bodies active in this area

Loan availability and investment: Can innovative companies better cope with loan denials?

This study examines the consequences of loan denials for the investment performance of small and medium-sized German enterprises. As a consequence of a loan denial, innovative companies experience a smaller drop in the share of actual to planned investment than non-innovative companies. The non-randomness of loan denials is controlled for with a selection equation employing the intensity of banking competition at the district level as an exclusion restriction. We can explain the better performance of innovative companies by their ability to increase the use of external equity financing, such as venture capital or mezzanine capital, when facing a loan denial. --Investment,loan availability,innovation,private equity

Estimating an SME investment gap and the contribution of financing frictions. ESRI WP589, March 2018

In this paper, we use firm-level survey data to explore the determinants of SME investment activity and the extent to which observed investment is in line with that suggested by economic fundamentals. In contrast to previous literature which has focused on whether investment gaps exist at a more aggregate level, we find evidence that for SMEs actual investment is below what would be expected given how companies are currently performing. The estimated magnitude of this investment gap is economically meaningful at just over 30 per cent in 2016. We explore the extent to which the gap is explained by financial market challenges such as access to finance, interest rates, and the availability of collateral. Financing frictions are found to account for a moderate share of the overall investment gap (between 10 per cent and 20 per cent of the gap)

A comparative analysis of the UK and Italian small businesses using Generalised Extreme Value models

This paper presents a cross-country comparison of significant predictors of small business failure between Italy and the UK. Financial measures of profitability, leverage, coverage, liquidity, scale and non-financial information are explored, some commonalities and differences are highlighted. Several models are considered, starting with the logistic regression which is a standard approach in credit risk modelling. Some important improvements are investigated. Generalised Extreme Value (GEV) regression is applied in contrast to the logistic regression in order to produce more conservative estimates of default probability. The assumption of non-linearity is relaxed through application of BGEVA, non-parametric additive model based on the GEV link function. Two methods of handling missing values are compared: multiple imputation and Weights of Evidence (WoE) transformation. The results suggest that the best predictive performance is obtained by BGEVA, thus implying the necessity of taking into account the low volume of defaults and non-linear patterns when modelling SME performance. WoE for the majority of models considered show better prediction as compared to multiple imputation, suggesting that missing values could be informative

modeling hard and soft facts for smes some international evidence

n/

Business coping strategy, entrepreneurial orientation, improvisational competence, and crisis readiness of the Malaysian medium-sized manufacturing enterprises in recessionary times

The main issue of this thesis was the hampered performance of the manufacturing small-and-medium-sized enterprises (SMEs) in Malaysia during economic recessions. The bona fide respondents of the study were the medium-sized manufacturing enterprises (MMEs). Crisis readiness (CR) was proposed as the surrogate measure for firm performance. While CR was examined in relationships to business coping strategy (BCS) and entrepreneurial orientation (EO), this study also assessed the mediating effect of improvisational competence (IC) on the BCS-CR relationship. Altogether, a three-pronged-objective research framework was theoretically underpinned by resource-based view. Simple random sampling technique was used to select the targeted respondents. Of the 295 usable responses, a random near-split-half of 145 and 150 were used for exploratory and confirmatory factor analysis respectively. Statistically significant positive relationships were found in two direct relationships: BCS-CR and EO-CR, while IC was found to mediate the BCS-CR relationship. Significant positive relationships were also evident between all dimensions of EO and CR, except risk-taking. While CR was a new performance surrogate, its examination with BCS, EO, and IC contributed nascent theoretical insights. Other theoretical gaps included the development and validation of the BCS and bricolage scales, psychometric revisions of the CR and IC scales, and the incorporation of a vignette into the measurement to provide standardization as to the recessionary context understudied. Practically, the findings provided the manufacturing entrepreneurs some guidance on the appropriate response strategy and decision making which would better-position them in recessionary situations. Likewise, the understandings may also assist the policy makers to develop or to adjust policies to better-fabricate assistance channelled to MMEs. Towards the end, methodological limitations and potential avenues for future research were also identified