Europe and Central Asia

Of the 54 firms to have listed on Borsa Italiana’s secondary market for smaller firms, 18 have done so this year. The most unusual was Blue Note Milano, a jazz club,which last month sold 40% of its shares for €1.4m ($1.9m). In Europe, small and medium-sized enterprises (SMEs) usually ask banks, not markets, for money. But new bank lending to small firms in the euro area plummeted 35% between 2008 and 2013 to €649 billion (see chart). It fell sharply in Britain too.

Recent years have witnessed the emergence of the phenomenal alternative finance movement that is – crowdfunding and peer-to-peer lending.
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Lots to think about in this paper.  One finding which did not surprise me was that it's incorrect to think that foreign banks in these markets do mostly transactional (data) based lending, while local banks do mostly relationship (credit officer, high-touch) based lending.   In fact, one can find numerous counterexamples in both types.  My experience with EBRD technical assistance to both types of banks taught me that, even if the European parent did mostly transactional lending, these people often were not transferred into the emergin markets, and the banks relied more on relationship based approaches taught, in many cases, by EBRD-sponsored external consultants.  By contrast, some of the more ambitious local banks wanted to get a leg up on the competition by pushing into more technology based transactional approaches, particularly if they had a large customer base and geographic footprint. On the other hand, what's really new and interesting to me was evidence that the institutions with a stronger relationship base were kinder to their SME clients during the downturn...I had heard numerous people theorizing that this would be the case, pre-crisis --- but this is the first true empirical evidence I've seen for emerging markets on this occurrence. Just goes to show that we need both the computer and the shoe-leather approach to SME finance going forward!matt

The appetite for financing of the local small and medium enterprises has been constantly developing for the past years, Garanti Bank registering an annual average growth of 20% in the SME segment from 2010 and up to the present.

Small and medium-sized enterprises (SMEs) in Europe will soon have access to up to EUR25 billion of additional finance, as a result of an agreement signed on Tuesday between the European Commission and the European Investment Fund (EIF). The agreement paves the way for providing equity and debt financing for SMEs under the EU Competitiveness of Enterprises and SMEs (COSME) program by the end of 2014.

BIAC - the Voice of OECD Business -  is an independent international business association devoted to advising government policymakers at OECD and related fora on the many diversified issues of globalisation and the world economy.
Officially recognised since its founding in 1962 as being representative of the OECD business community, BIAC promotes the interests of business by engaging, understanding and advising policy makers on a broad range of issues.

The EIB Group is committed to maximising its support to SMEs as the drivers of economic growth and prosperity. In 2013 the Group reinforced its counter-cyclical role, providing its financial intermediaries with wide-ranging and innovative financial solutions tailored to fit the individual needs of Europe’s micro-enterprises, small business and mid-caps.
With support totalling a record EUR 21.9bn last year, the European Investment Bank Group maintained its role as a key player in the European solution for economic recovery.

Following the global financial crisis, policy makers’ attention has focused on lending to SMEs, as these were among the most affected when the credit cycle turned. Governments have introduced various measures that may alleviate short-term funding constraints but are unlikely to be a long-term solution. So is there a way to protect entrepreneurs in a more structural way from the cyclicality of credit?

A new EBRD working paper shows small businesses suffer fewer credit constraints during a financial crisis when local banks know them well.
Following the global financial crisis, policy-makers’ attention has focussed on lending to SMEs, as these were among the most affected when the credit cycle turned. Governments have introduced various measures that may alleviate short-term funding constraints but are unlikely to be a long-term solution. So is there a way to protect entrepreneurs in a more structural way from the cyclicality of credit?

How do we ensure that companies with the potential to grow do so?Does a lack of finance prevent firms from growing and benefiting the wider economy?These are important questions if we are looking for economic growth. There has been much focus and debate on the funding issues affecting small and medium sized entities (SMEs), but this report takes that debate a stage further by investigating ‘high growth SMEs’.