SME Finance

SME Finance

Micro, small and medium enterprises (MSMEs) are the lifeblood of many economies, particularly in developing countries. Globally, they represent about 90 percent of businesses and more than 50 percent of employment. MSMEs also contribute significantly to gross domestic product and exports, making their development a high priority for many governments around the world.

Despite their importance to inclusive economic growth, many MSMEs do not have adequate access to finance. With limited collateral, a lack credit history and low credit worthiness, the SME finance (SMEF) credit gap in developing countries is estimated at roughly USD5 trillion, 1.3 times the current level of lending for the sector. Most MSMEs have low equity ratios and are more vulnerable than large enterprises to external influences, such as price and interest rate risks.

In response, government regulators and policymakers introduced a variety of measures to support MSMEs with both demand-side and supply-side initiatives, including legislation, regulation, infrastructure, capacity building and education.

Fundamental and emerging topics under SMEF are explored in-depth through AFI’s SME Finance Working Group (SMEFWG).

SMEF and gender

Women-owned businesses account for 28 percent of businesses and 32 percent of the MSME finance gap, the latter of which the 2017 MSME Finance GAP estimated at USD1.7 trillion. Across all regions, women entrepreneurs have lower access to finance than their male counterparts, while their terms of borrowing can often be less favorable. This restricts the growth of women-owned businesses and inhibits their ability to contribute fully to the economy. From the demand-side, women-owned MSMEs face various business challenges (e.g. nature, size, socio-demographic and geography) as well as financial inclusion challenges (e.g. access, usage, affordability, awareness, financial literacy, social norms and safety).

Maputo Accord

The Maputo Accord, launched during the 2015 AFI Global Policy Forum, supports access to finance for MSMEs in acknowledgement of their shared objective with financial inclusion — to promote sustainable and inclusive development, as well as spurring innovation.

SMEF Maya Declaration commitments by AFI members:

Primary thematic area2013201420152016201720182019

SMEF Maya Declaration commitments by AFI members
Maya Declaration targets6101148555564
Completed46620232330
In progress24528323434
Completion rate67%60%55%42%42%38.2%47%

 

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SDGs

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