Regulation and Supervision

If Australia has been a hotbed of disruption, across all industries, the financial services sector has been the hot water bottle in the hotbed. From the days when the likes of Pepper, Wizard, Aussie Home Loans and Liberty Financial first began to offer alternative sources of home loans to the major banks, through the emergence of alternative payment systems such as PayPal, to the attack by the likes of OzForex and Pepperstone on the banks' foreign exchange business, to the savaging of the traditional full-service stockbrokers' lucrative client relationships by online brokers, through to the Australian Securities Exchange itself having its stock-trading monopoly disrupted by the broker-owned Chi-X, the financial services sector has buzzed with the hum of disruption.Disruption has reached into virtually every area of the industry – and anywhere it has not yet been felt is merely a matter of "watch this space."Nothing stands still: the disrupted become disruptors, and vice versa. While fighting Chi-X in one area of its business, the ASX launched the mFund Settlement Service to disrupt the financial advice industry. mFunds allow any consumer to buy and sell managed funds directly on the ASX in the same way and for the same cost as they buy and sell shares, without having to use a financial planner or a platform.

Tackling the twin challenge of providing a concessionary tax regime for Small and Medium Enterprises (SMEs) while aiming to expand the tax base would require a better policy formulation, argues a new study by the Institute of Policy Studies of Sri Lanka (IPS). 
A recently launched Country Study for Sri Lanka is part of a wider study titled ‘Tax Policy and Enterprise Development in South Asia’, which IPS conducted in collaboration with five other leading think tanks in the South Asian region. 

The European Union and many of its individual member states are working on ways to improve SMEs’ access to working capital on the understanding that small businesses are the backbone to economic strength and employment. These efforts are largely fueled by the impacts of the economic crisis, which forced banks to adopt more stringent lending rules. SMEs saw higher interest rates, if they were approved for a bank loan at all.Today, alternative funding is viewed by many as the remedy to SMEs’ weakened access to working capital, though some research shows that banks are relaxing their lending behaviors.New proposals by the Basel Committee on Banking Supervision, however, could introduce a new wave of SMEs unable to access working capital from a traditional financial institution. Experts agree that, if approved, the Basel regulations would have widespread effects on the banking sector and the SME community throughout the jurisdictions that adopt them. Just what those effects are, however, are unclear, and are likely to vary from country to country. The Basel Committee’s proposals are likely to harm SMEs that depend on banks to access capital, but they may also boost the alternative lending markets in nations that embrace the industry.

Organized by the Pan African Chamber of Commerce, with several African states, this initiative has brought together
the public and private sectors around the question ("How to access financing for SMEs").

In most African economies, banks remain the major source of external capital for both large businesses as well as small enterprises, and indeed for the private sector and the economy as a whole. However, there remain well-documented impediments to the flow of credit, especially to micro, small and medium sized enterprises (MSMEs). The major market imperfection is ‘asymmetric information’. In other words, it is costly to collect and process the information necessary to select the least risky borrowers, or to ‘screen’ them, and it also costly to ‘monitor’ their use of the borrowed funds, which explains why banks ration the supply of credit, especially to MSMEs.In a recent paper, we explore this issue and highlight financial sector policies for African countries to promote enterprise development at all levels, including start-ups, micro, small and medium-sized firms, and large corporates is discussed. Here, we are necessarily more selective.

This paper explores the key issues relating to financial sector policies for enterprise development, with special implications for Africa. The role of the formal financial sector – ranging from microfinance institutions, banks, the capital market, and regulatory agencies – is discussed with respect to enterprise development at all levels, including start-ups, small and medium firms, and large corporates. Specific policy choices for African countries are highlighted, including exploiting the current communications and information technology (CIT) revolution.

The Indian government has decided to change the definition of what constitute small and medium enterprise (SME), notably by raising the capital caps for qualification, in a bid to revive a sector that is India's second-largest employer, with a 40 percent share in exports.