1. Closing the Credit Gap for Formal and Informal Micro, Small, and Medium Enterprises
- Author
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Stein, Peer, Ardic, Oya Pinar, and Hommes, Martin
- Subjects
CORPORATIONS ,CREDIT CONSTRAINT ,BANKING MODELS ,EMPLOYMENT OPPORTUNITIES ,INFORMATIONAL ASYMMETRIES ,CREDIT GUARANTEE ,DEPOSIT ,MULTINATIONALS ,OVERDRAFT ,INSURANCE AGENCIES ,UNEMPLOYMENT ,COMPETITORS ,FINANCIAL INFRASTRUCTURE ,ACCESS TO BANK ACCOUNTS ,BRIBE ,FORMAL ECONOMY ,FINANCIAL INTERMEDIARIES ,WOMEN ENTREPRENEURS ,BUSINESS OWNERS ,COLLATERAL ,COMPANY ,OVERDRAFTS ,MEDIUM ENTERPRISE ,TIME DEPOSITS ,MEDIUM ENTERPRISES ,BRIBES ,EMERGING MARKETS ,BANK ACCOUNTS ,FINANCIAL MARKETS ,FIRMS ,TAX LIABILITY ,CONSULTING SERVICES ,POINT OF SALE ,DEPOSITS ,INFORMATION SYSTEMS ,INTERNATIONAL FINANCE ,STATE OWNED BANKS ,MULTINATIONAL ,NEW MARKET ,ID ,ACCESS TO MARKET ,LACK OF CREDIT ,ACCESS TO FINANCIAL SERVICES ,ECONOMIC COOPERATION ,INTEREST RATES ,SMALL BUSINESS ,TERMS OF LOANS ,CREDIT RISK ,AVAILABILITY OF CREDIT ,GUARANTEE SCHEMES ,WORKING CAPITAL ,FINANCIAL SERVICES ,CASH FLOW ,PROFITABILITY ,PENETRATION RATES ,FINANCIAL LITERACY ,MANAGEMENT INFORMATION SYSTEMS ,BANK ACCOUNT ,FINANCIAL SUSTAINABILITY ,REGISTRATION PROCESS ,NEEDS OF WOMEN ,NEEDS OF WOMEN ENTREPRENEURS ,DEPOSIT ACCOUNT ,EXCLUSION ,TRANSPORTATION SERVICES ,LENDERS ,PUBLIC FUND ,FORMAL FINANCIAL SECTOR ,GREATER ACCESS ,NEW BUSINESSES ,PROPERTY LAW ,BUSINESS ENABLING ENVIRONMENT ,SME SECTOR ,ACCESS TO INFORMATION ,SME ,SME FINANCE ,LEASING ,CREDITWORTHINESS ,LARGE ENTERPRISES ,CAPITAL STOCK ,DEPOSIT PRODUCTS ,BUSINESS PLAN ,FINANCIAL INSTITUTIONS ,CREDIT BUREAUS ,BANKING SERVICES ,EMPLOYER ,PRIVATE CREDIT ,BANKS ,PRIVATE COMPANIES ,SMALL BUSINESS BANKING ,LOAN ,DEVELOPING COUNTRIES ,SECURITIES ,MICROFINANCE ,CREDIT HISTORY ,FINANCE INITIATIVE ,REAL ESTATE ,SUBSIDIARY ,GENDER EQUALITY ,NEW MARKETS ,AGRICULTURAL ACTIVITIES ,CORRUPTION ,MOVABLE COLLATERAL ,SMALL FIRMS ,LAWS ,FINANCIAL NEEDS ,CREDIT MARKET ,GENDER ,STORE ,REGULATORY BURDEN ,CORPORATION ,INVENTORY ,ECONOMIC GROWTH ,EMPLOYERS ,SMART CARDS ,ENTREPRENEUR ,EMPLOYMENT GROWTH ,CUSTOMER BASE ,BRANCH NETWORK ,BUSINESS ENABLING ,TRANSACTION COSTS ,INFORMATION DISSEMINATION ,MANUFACTURERS ,BANK LENDING ,PRIVATE COMMERCIAL BANKS ,PARTIAL CREDIT ,PRODUCTIVITY ,BUSINESS ASSOCIATION ,FINANCIAL CRISIS ,SAVINGS ACCOUNTS ,FINANCIAL SERVICES FOR WOMEN ,INTERNAL FUNDS ,BUSINESS OPPORTUNITY ,CHECKING ACCOUNT ,RISK MANAGEMENT ,LACK OF COLLATERAL ,ENTERPRISE FINANCE ,BORROWER ,BUSINESS ASSOCIATIONS ,CHECKING ,INFORMAL ECONOMY ,CAPITAL LOANS ,DEVELOPMENT FINANCE ,SHOPS ,ENTREPRENEURIAL ACTIVITY ,MICROENTERPRISES ,FINANCING SHORTFALL ,LACK OF ACCESS ,CREDIT GAP ,REGULATORY REFORM ,LOANS TO WOMEN ,DEMAND FOR CREDIT ,AFFILIATES ,FACILITATION ,BANKING SECTOR ,COUNTRY COMPARISONS ,CULTURAL BARRIERS ,SOCIAL SECURITY ,RETURN ON INVESTMENT ,SME FINANCING ,COMMERCIAL LOANS ,HUSBAND ,CONTRACT ENFORCEMENT ,ECONOMIC DEVELOPMENT ,ACCESS TO FINANCE ,CHECKING ACCOUNTS ,PARTIAL GUARANTEE ,INCOME GROUP ,ECONOMIC ACTIVITY ,COLLATERAL REQUIREMENTS ,INFORMAL FINANCING ,ACCESSIBILITY ,ACCESS TO MARKETS ,FORMAL FINANCIAL SERVICES ,LINES OF CREDIT ,ACCOUNTING ,LIMITED ACCESS TO FINANCE ,MICRO ENTERPRISES ,ACCESS TO EDUCATION ,WOMAN ,BANK FINANCING ,E-LEARNING ,SMALL ENTERPRISES ,INFORMAL FINANCE ,SUPPLIERS ,HUMAN CAPITAL ,INSURANCE ,SUPPLY CHAIN ,LOANS FOR WOMEN ,SIZE OF FIRM ,ACCESS TO RESOURCES ,COMMERCIAL BANKING ,FINANCIAL INSTITUTION ,MICROFINANCE INSTITUTIONS ,REGULATORY REFORMS ,PUBLIC POLICY ,ACCESS TO CREDIT ,LOANS FOR WOMEN ENTREPRENEURS ,SUPPLY CHAINS ,COMMERCIAL BANKS ,LOAN GUARANTEES ,MICRO-ENTERPRISES ,SME LENDING ,MONETARY FUND ,LIMITED ACCESS ,EXTERNAL FINANCE ,RECEIPTS ,ACCOUNTS RECEIVABLE ,JOB CREATION ,REAL SECTOR ,CASH FLOWS ,ENTREPRENEURSHIP ,SAVINGS ,BRANCH ,CAPACITY BUILDING ,DEVELOPMENT FINANCE INSTITUTIONS ,OUTREACH ,NET LOSS ,LACK OF INFORMATION ,MULTINATIONAL COMPANIES ,CREDIT DECISIONS ,ADVISORY SERVICES - Abstract
Job creation and economic growth through private sector development have become primary areas of focus for policy makers around the world in the aftermath of the global financial crisis. Recent evidence points to the importance of small and medium enterprises (SMEs) in providing employment across countries. In addition to employing the largest number of people in aggregate, SMEs generate the most new jobs. But SMEs also face many challenges in day-to-day operations and to grow. This note is a report back on the state of the credit gap for MSMEs with this new and updated data, while providing additional focus on the sizable informal enterprise sector in the developing world. In addition, this report examines various operational challenges that small and informal firms face, and some formalization obstacles they often cite as the primary reasons for not registering their business. A framework to differentiate the informal sector is offered, with the intention of segmenting the vast landscape of informal firms some of which exist today due to opportunistic behavior, while others are just trying to survive and to better design specific interventions depending on the stage of development and the willingness of the firm to register its business. The rest of this report is organized as follows. Section I focuses on the credit gap for formal MSMEs, and offers some innovative models and interventions that can be used to more fully meet the financial and non-financial needs of formal MSMEs. Section II focuses exclusively on informal enterprises, and goes beyond the access to finance paradigm, describing the operational challenges faced by informal firms, reviewing the experiments that have tried to induce higher rates of formalization, and looking at a series of private sector models that if combined, could more fully meet the needs of informal firms.
- Published
- 2013