The Role of SMES in Asia and Their Difficulties in Accessing Finance
Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad | December 2018
Abstract
Small and medium-sized enterprises (SMEs) are the backbone of the Asian economy. They make up more than 96% of all Asian businesses, providing two out of three private-sector jobs on the continent. Therefore, it is vital for Asian economies’ economic success that they have fully functioning support measures for SMEs. However, SMEs face major challenges in accessing cheap finance, mainly because of the asymmetric information problem between suppliers and demanders of funds and the high transaction costs. These lead to more collateral requirements for lending to SMEs with higher lending interest rates, which hinder their growth. As most Asian countries are bank-dominant economies, capital market financing is not a realistic option for SMEs. Therefore, we need to look for solutions that make the bank lending to SMEs easier. This study will highlight the difficulties of SMEs in accessing finance and provide measures for mitigating them. The remedies proposed in this paper are the development of credit information infrastructures for SMEs and the utilization of credit-rating techniques for SMEs to address the asymmetric information problem and the development of a sustainable credit guarantee scheme to solve the collateral issue of the SMEs and ease their access to finance.
Citation
Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad. 2018. The Role of SMES in Asia and Their Difficulties in Accessing Finance. © Asian Development Bank Institute. http://hdl.handle.net/11540/9483.Keywords
Development
Finance
Development Challenges
Development Issues
Development Problems
Microenterprises Finance
Commercial Finance Companies
Enterprise Financing
Financial Analysis
Banking Finance And Investment
SMEs
Small Business Finance
ADB
Project finance
Development plans
Strategic planning
Business Financing
Investment Requirements
Insurance Companies
International Monetary Relations
International Financial Market
Exchange Rate
Insurers
Insurance stocks
Insurance holding companies
Insurance carriers
Insurance agencies
Business subsidies
Investment companies
Foreign investment
Equity Finance
International banks and banking
Stock exchanges
Grants
Loans
Communication in rural development
Communication in community development
Economic development projects
Development banks
Economic forecasting
Environmental auditing
Cumulative effects assessment
Human rights and globalization
Small business
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