Regulation and Supervision

Given the importance of SMEs as the backbone of the EU economy, their access to finance is of particular relevance. Unlike other companies in the EU, SMEs are more concerned with access to finance, largely due to their reliance on banks. In 2013 and 2014, many SMEs continued to experience financing difficulties, especially those from the most vulnerable EU Member States, which faced higher interest rates and stricter lending conditions. In this article the authors analyse and summarise the current state of SME financing in Europe.

Responding to SMEs’ relatively low access to financing, a number of organizations are making efforts to help push the growth of SMEs. One of such organizations is Inotek, a foundation established by entrepreneur Sandiaga Uno, which provides funds to technology based SMEs.

APEC member-economies are pushing for making credit more accessible to small and medium enterprises (SMEs) in the Asia-Pacific region as part of its thrust toward financial inclusion.

Members can do a lot more since inroads were already carved leading to SME financing, APEC delegates said in a statement after the two-day 2015 Asia-Pacific Forum on Financial Inclusion on Wednesday in Tagaytay City.

On January 28th, a group of 40-50 emerging market SME bankers gathered in Goa, India to partake in Capital Plus Exchange’s hands-on Credit Risk and Problem Loan Management workshop.In her welcoming address, CapPlus’ CEO Lynn Pickholz emphasized the importance for lenders to implement new risk management techniques through an analogy: “Only the dead fish swim downstream.”The next two days were focused on exchanging insights and best practices on reducing and monitoring credit risk as well as ameliorating problem loans. Below, EFL shares some of the common pain points felt by MSME lenders and key takeaways on best practices.

Lars Norden, endowed professor of Banking and Finance at Rotterdam School of Management, Erasmus University (RSM) will give his inaugural address, The Role of Banks in SME Finance, on Friday 20 February 2015. He will explore the role of banks in finance for small and medium enterprises (SMEs) and argue that relationship lending works, but that trade credit has limited scope to replace bank debt when banks are forced to cut their lending.

China's Mintai Institute of Finance and Banking has just released an English Summary Translation of its latest 2014 Annual Report on MSME Finance. The original Chinese version published in August 2014 has over 400 pages of good analysis on the developments and challenges of financing MSMEs in China, with rich information and statistics. Two highlights from this summary translation are of particular note.

The Arab Monetary Fund, in cooperation with the World Bank Group, and the Central Bank of Egypt are organizing the 2015 Small and Medium Enterprises (SME) Business Development Conference on the "Role of Regulators in Promoting SME Financing in the Arab countries", to be held at Fairmont Nile City Hotel, Cairo - Egypt on January 14-15,

The central bank governor instructed all scheduled banks on Sunday to sanction loans up to Tk 2.5 million to women entrepreneurs without any security deposit.
Bangladesh Bank Governor Dr Atiur Rahman said, "There is no bank loan defaulter among the women entrepreneurs. Yet they have to suffer a lot in getting loan from the banks. I don't know why. Please ensure loans up to Tk 2.5 million to them without security deposit."

Please see the link for the official announcement from the Turkish government.  2015 should be a very exciting one for SME finance and SME development.  Turkey has been a leader in the SME agenda of the G20 since its inception, and has served as co-chair of the SME finance subgroup since SME finance became a priority for the G20 in 2009.  As a technical partner to the G20's Global Partnership for Financial Inclusion, the SME Finance Forum looks forwarding to supporting the Turkish agenda during this coming year. 

Our readers may also see that Turkey will be forming a new global body to represent SMEs' own interests during 2015.  Unfortunately the working name for this entity is "SME Forum", which risks some brand confusion, for obvious reasons!.  We'll also be working with our G20 colleagues on this, hopefully with some resolution that helps build and grow this very worthwhile complementary institution, while avoiding too many cases of mistaken identity.

matt

The main risks of the Basel III framework in particular with regards to SMEs are:

■ Limiting the efficiency of SME lending.
■ The weak profits spread of the European companies limits their own flexibility to adapt to an increase in costs.
■ This is also going to prolong the structural trend of SMEs to reduce their recourse of lending in order to increase
the soundness, thus sacrificing business growth.
■ This leads to a limitation of the potential growth of SMEs and as a result to a limitation of the competitiveness
of the overall economy.