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留学作业网提供留学生金融学作业定制REPSF Project 04/003: Final Main Report –Executive Summary 1
SME ACCESS TO FINANCING: ADDRESSING THE SUPPLY SIDE OF SME FINANCING
REPSF Project No. 04/003
Author:
RAM Consultancy Services Sdn Bhd
FINAL MAIN REPORT
July 2005
EXECUTIVE SUMMARY
Small and medium scale enterprises (SME) are the backbone of many successful developednations such as Japan, Chinese Taipei, Germany and the Republic of South Korea. ASEANcountries too have touted SME as the new engine of economic growth and development. Inthe last decade or so, various ASEAN governments have formulated national agendas and
development polices addressing all aspects of demand and supply to promote the SMEsector. However, ASEAN SMEs’ contribution to the economy has not reached a level on parwith SME in developed countries. Various challenges and impediments prevent SME fromdeveloping to their full potential. One of which is the access to formal sector financing.
This study seeks to discover the factors that inhibit SME lending by financial institutions byexamining the institutional, legal and regulatory framework present in ASEAN membercountries. Concurrently, the research also examines the viability of credit scoring in improvingaccess to finance for SME and surveys the interest of financial institutions to undertake creditscoring for SME loans. The report draws on the findings of the research and fieldwork surveyto recommend appropriate strategies to improve access to financing.SME in ASEAN draw financing primarily from internal funds and the informal sector. Formalsector financing makes up less than 25% of funding needs. This figure is even lower in thetransition economies where banking intermediation is still relatively low. A survey of financialinstitutions throughout ASEAN revealed that many banks and non-bank institutions aregenerally keen to lend to SME as they realise that on a portfolio basis, SME loans providehigher returns and lower risk compared to large corporate loans. However, these fundinginstitutions face severalimpediments in financing SME. Naturally, financial institutions
attribute most of the impediments to either the government, the prevailing legal andregulatory framework, or the SME. The objective view is that no party is entirely free fromblame.
Governments in ASEAN have generally been supportive of SME development by initiatingvarious financing programmes and support measures. These have taken the form of interestsubsidies, grants, credit guarantee schemes, loan quotas, export financing, developmentfinance institutions, specialised institutions and the like. By and large, the general consensusis that these government supported initiatives have not been as successful as intended, asindicated by the low rate of formal sector financing achieved by SME. Many have argued thatdespite the good intentions of government, public sector measures have generated negativetrade-offs and encouraged the emergence of a dependency syndrome, which more than offsetthe massive subsidies committed to the sector. More often than not too, financingprogrammes for SME have been compromised by the lack of coordination of governments’development policies or their ad-hoc implementation.#p#分页标题#e#
SME Access to Financing: Addressing the Supply Side of SME Financing
REPSF Project 04/003: Final Main Report –Executive Summary 2
The legal and regulatory framework existing in many ASEAN countries also fails to providethe right support infrastructure to facilitate SME lending by the formal sector. The lack ofprotection for creditors and enforcement of collateral rights, lack of commercial disputesettlements and arbitration, archaic laws which are not business friendly, lack of fiscalincentives for small enterprises, strict prudential regulations which restrict flexibility of banks,unduly complex or onerous administrative procedures and even simply the lack of aconsistent definition or enabling law for SME are some of the impediments to SME financing.
http://www.ukassignment.org/liuxueshenglunwen/It has been pointed out that SME are actually caught between a rock and a hard place: theyare large enough to be regulated yet not large enough to enjoy the benefits that are reapedby large enterprises.
As for financial institutions, the study found that some are risk adverse to lending toinformationally opaque SME, while others simply do not have the skills needed to understandand evaluate SME. In some large banking institutions, the prevailing mindset is still one of‘bigger is better’. As a result, they demand for collateral, require onerous documentations andsubject the SME to the same evaluation criteria as they would large and structured
corporations. The poor information environment in many ASEAN countries does not helpeither. Non-bank financial institutions (such as finance or credit companies) and smallerboutique banks are usually found to be more perceptive and knowledgeable about SME
financing than their larger cousins. However, a positive trend is appearing among financialinstitutions – armed with the lessons learnt from the Asian Crisis and faced with greater
competitive pressure, they are increasingly looking to increase lending to medium and smallsized enterprises. The availability of newer technologies such as credit scoring has facilitatedthe progress of some banks’ foray into this segment.
As such, most financial institutions are supportive of applying credit scoring to SME loans. Infact, more than 70% of survey respondents in ASEAN-6 economies have implemented someform of rating or scoring for SME loans. However, only a handful of financial institutions aredeploying objective scorecards that do not require subjective inputs. Notwithstanding the
positive feedback of survey respondents toward the use of credit scoring for SME loans, thisreport poses the question of what is the real benefit of credit scoring in this context. Thebenefits of credit scoring are obvious for high volume low value loans and in the riskmanagement of such portfolios. But if SME generally do not have high disclosure standards
and are informationally more opaque by nature, would the use of credit scoring really make adifference to the loan decision?#p#分页标题#e#
The research concludes with several recommendations that could facilitate greater access tofinancing by SME at the national level. According to their respective needs, countries couldconsider to, among other measures, improve the outreach of credit guarantee programmes,promote greater engagement by non-bank financial institutions, standardise SME definition
http://www.ukassignment.org/liuxueshenglunwen/and promote informal debt workout mechanisms for SME while banks in the region could
facilitate SME financing by improving the credit evaluation skills of their officers, establishspecialised SME units and consider greater interaction with SME associations. The detailedrecommendations for each country are found in the individual country reports.Given the diversity in the economic development and institutional framework of ASEANmember countries, it is quite difficult to recommend regional initiatives that are practical andyet readily adopted for action. Regional initiatives that will materialise into tangible actions
require more than mere talk but great effort and real commitment on the part of therespective stakeholders. As such, the recommendations made in this report for regionalinitiatives are necessarily high 指导留学生论文level but will hopefully plant a seedling for a practical idea totake off in the near future. The plausible regional initiatives that ASEAN members couldperhaps consider include capacity building of newer ASEAN members, organising regionalfinancial forums, establishing a common regional SME definition, creating a reporting
SME Access to Financing: Addressing the Supply Side of SME FinancingREPSF Project 04/003: Final Main Report –Executive Summary 3
framework for SME statistics, creating a regional database for SME in ASEAN and procuringnational governments to consider a simplified accounting standards for SME.
July 2005
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