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Abstract : The SME Financing Gap: Theory and Evidence
Many commentators have postulated a "financing gap" for small and medium-sized enterprises (SMEs), meaning that there are significant numbers of SMEs that could use funds productively if they were available, but cannot obtain finance from the formal financial system. This article summarises an OECD report (OECD, 2006) on this topic which seeks to determine how prevalent such a gap may be - both in OECD countries and non-member economies - and recommends measures to foster an improved flow of financing to SMEs.
Summary
I. Background
At the 2nd OECD Ministerial Conference on SMEs held in Istanbul, Turkey, in June 2004, Ministers recognised in the Istanbul Ministerial Declaration "the need to improve access to financing for SMEs on reasonable terms [...]". Ministers underlined the importance of this issue by encouraging the OECD to organise a thematic conference for further discussion to seek more innovative solutions and initiatives for facilitating SME access to financing, from firm creation through all stages of development.
The high-level OECD Global Conference on "Better Financing for Entrepreneurship and SME Growth", hosted by the Brazilian Government (Brasilia, 27-30 March 2006) in the framework of the OECD Bologna Process on SME ana Entrepreneurship Policies, provided an occasion to achieve these objectives. At that conference, a keynote paper on the SME Financing Gap was presented and discussed which provided the basis for a report being published on the responsibility of the secretary-General of the OECD (The SME Financing Gap (Vol. 1): Theory ana Evidence, OECD 2006*). The following is the executive summary of the report, which analyses the financing gap, discusses challenges of debt financing of SMEs and perspectives for venture capital financing, draws conclusions and gives recommendations on how to foster SME financing.
II. Executive Summary
Many commentators have postulated a "financing gap" for small and mediumsized enterprises (SMEs), meaning that there are significant numbers of SMEs that could use funds productively if they were available, but cannot obtain finance from the formal financial system. The OECD report on the SME financing gap, which is summarised here, analyses the "financing gap" concept, seeks to determine how prevalent such a gap may be - both for OECD countries and non-member economies - and recommends measures...