Micro, Small and Medium Sized Enterprises (MSMEs) are key drivers of job creation, economic diversification and innovation, especially in developing countries whose economies are frequently based on natural resources.  Despite their critical role, MSMEs face a broad range of constraints that smother their potential.    These include poor hard and soft infrastructure, unhelpful environments, as well as a lack of skills, experienced mentors and easily accessible markets. Of primary importance, however, is that access to finance for MSMEs is severely restricted in many developing countries.  The total unmet need for credit by all formal and informal MSMEs in emerging markets today is significant – in the range of $2.1 trillion to $2.5 trillion, according to the IFC and McKinsey.

One area for focus is building the capacity of local financial institutions to provide finance for SMEs.  CDC, the UK’s development finance institution (DFI), whose mission is building businesses in Africa and Asia and creating jobs, works with over 200 financial institutions in 30+ countries to make SME finance more easily available.  In Uganda, CDC is this year celebrating the 50th anniversary of DFCU, which it co-founded with the Government of Uganda in 1964. DFCU has grown to become one of the country’s largest banks and a leading provider of finance to small businesses.

To coincide with this anniversary, Business Fights Poverty in partnership with CDC is leading a discussion on how best to help small businesses to grow.

Key questions for the discussion include:

  • What are the biggest constraints currently facing small businesses, particularly in relation to accessing finance, and where are the most significant gaps in terms of the provision of enterprise support? 
  • Where are the innovations happening in relation to SME support, especially around financing,  what are we learning about what works, and how can we move towards solutions at scale?
  • In which areas can public-private collaboration provide the greatest value for small businesses, and where should investments focus?
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Matthew, Can I have the link to your blog? 

Hi Miebi - I think this is the link Matthew is referring to: http://smefinanceforum.org/322200/blog

Thank you Zahid

The main constraints to access of finance by MSMEs are many but can be broken down into 3: a) business enabling environment expressed through fiscal policies , laws and strategies. Many government policies are just there on paper not actually translated into appropriate implementable laws,strategies , technologiesand programmes for use by commercial banks to enhance development of innovative financial products for the SMEs; b) SMEs vulnerability to financial risks is higher relative to larger businesses due to lack of capital equipment or assets that can be used as a collateral in case of eventualities like default in repayment of a loan. Financial services providers opt for less risky businesses thereby taking calculated risks by prefering larger businesses with more assets than liabilities for them to stay in business; c) infrastructure: the SMEs are often doing their businesses in an inappropriate premises let alone the skills of Small and medium entrepreneurs hold the financial services providers from providing loans or grants to the SMEs. Further more, the mindset of some SMEs ought to be transformed to think commercial before they can access credit from banks and microfinance institutions.
  • "In which areas can public-private collaboration provide the greatest value for small businesses, and where should investments focus?" 

18 hours late, here is my take. A business model should already up and running and to a certain extent                profitable  before committing or involving a community.  Too much risk in starting up an SME when a community has a lot of  adjustments to make, e.g. values formation, capacity building, objectives setting, etc.  The probability to success   and sustainability is increased if less time is spent in experimenting with a business model.  Governments and                  private investors must recognize the need for hand holding until the program can run profitably.  I have seen a program or two collapse due to the "plug and play" manner of implementation.   As I posted many moons ago, SMEs need all the incentives and tax breaks from government until the business is highly profitable.  Private investors need to make time to  professionalize the SME.  Latly for private companies, value chain partnering is the way to go.



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