For a broader overview of the SMEs access to finance, check out the OECD 2018 scoreboard on ‘Financing SMEs and Entrepreneurs’.
OECD (Organisation for Economic Co-operation and Development) has published the 2018 scoreboard on ‘Financing SMEs and Entrepreneurs’.
By providing data and evidences, the report shows the trend in lending and finance to Small and Medium-size Enterprises (SMEs) in the last three years. The OECD’s work clearly demonstrates that, even though many SMEs remain over-reliant on bank credit, bank lending is generally declining in favour of alternative financing.
New lending to SMES declined in a majority of countries in 2016 (15 out of 25 OECD countries for which data were available). OECD noticed that this trend coincided with improvements in the operating environment for SMEs, as result of the drop in bankruptcies and payment delays, and a brighter outlook for macro-economic indicators. By the way OECD remarks that bank lending to SMEs decreased despite more favourable credit condition and low interest rates.
The report shows that the fall of lending in some countries was mainly due to demand-side issues which are often related to weak investment dynamics, such as weak demand for credit. As evidence, the report shows that other factors contributed to this trend, such as the weak macro-economic performance, a slow recovery for the economy, and the risk aversion in the financial sector.
The report points out that the take-up of alternative financial instruments other than straight debt varies greatly from one country to another. This trend relates not only to instruments based on asset value rather than credit standing such as leasing and hire purchases, but also to innovative sources of financing such as peer-to-peer lending, equity crowdfunding and invoice trading.
In its report, OECD also considered how governments help SMEs to access finance. The report shows that policies to foster access to bank financing are widespread in many countries and, to this extent, central governments use to develop credit schemes to ease access to credit for SMEs. However, OECD pointed that a rigorous evaluation is crucial to optimise these schemes and tailor them to evolving circumstances and needs of SMEs.
OECD report shows also that some countries have adopted comprehensive policy reform to address the needs of innovative start-ups, combining financial and non-financial-support. Several countries have developed policies to address intra-national disparities in SMEs access to finance, for instance initiatives to introduce local subsidiaries of national SME development funds or local development centres and programmes to stimulate digitalisation and entrepreneurship in lagging regions.
The report is available on OECD website.