SME and Entrepreneurship Access to Finance: An OECD Scoreboard
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SME and Entrepreneurship Access to Finance: An OECD Scoreboard

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Presented at the July 2012 Meeting of the OECD-MENA Initiative's Working Group on SME Policy, Entrepreneurship and Human Capital Development http://www.oecd.org/mena/investment

Presented at the July 2012 Meeting of the OECD-MENA Initiative's Working Group on SME Policy, Entrepreneurship and Human Capital Development http://www.oecd.org/mena/investment

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SME and Entrepreneurship Access to Finance: An OECD Scoreboard SME and Entrepreneurship Access to Finance: An OECD Scoreboard Presentation Transcript

  • SME and Entrepreneurship Access to Finance: an OECD Scoreboard MENA-OECD Investment Programme Meeting of the Working Group on SME Policy, Entrepreneurship and Human Capital Development Rome, 17 July 2012 Sergio Arzeni Director OECD Centre for SMEs, Entrepreneurship & Local Development (CFE)
  • SME Financing Gap in MENA Countries Structural deficiencies o Credit maninly directed to public sector and large firms Firms with loan/line of credit from financial institution (%) Source: IFC o SMEs and micro firms are under-collateralised o Cash flow shortages from late payments o Little venture capital for start-ups
  • Policies to improve SME access to finance The experience across OECD and non-OECD countries Easing cash flow • • • • • • • Direct lending Loan guarantees Deferring or exempting tax payments temporarily Capping interest rates Credit mediation Reducing payment delays by the public administration Collateral reforms (movable assets) Favouring long term equity investment • Guarantees and tax incentives for equity capital • Co-financing venture capital
  • SME Financing: the assessment challenge Policy makers and major stakeholders (e.g. financial institutions) lack the hard data necessary to: • Monitor SME financing trends and needs • Evaluate SME financing policies and programmes Knowledge gap on: - Supply of finance by (various) financial institutions - Demand and use of financing by SMEs - capital structure and destination of funding - Effectiveness of government policies directly and indirectly affecting SME access to finance
  • SME and Entrepreneurship Financing an OECD Scoreboard Objectives of the Annual Scoreboard: 1. Provide a tool for policy makers to monitor access to finance in a timely manner and judge policy effectiveness 2. Highlight important economic and policy developments 3. Identify and exchange on a regular basis good policy and practices 4. Guide governments to assemble meaningful indicators and favour harmonization of definitions and data collection methods
  • Building a monitoring framework 2010: Pilot Scoreboard (11 countries)  methodological input to the G20 SME Finance Sub Group 2012: First Edition (18 countries) • 2007-2010 – pre crisis (benchmark) – crisis – recovery • Thematic focus: Basel III and SME lending 2013: Second Edition (28 countries) • Learning process: Refinement of indicators and policy review • Thematic focus: role of public financial institutions International reference on SME financing
  • The Criteria for Selection of Indicators 1. Availability: they must be based on existing data or 2. Feasibility: data that could be made available easily 3. Usefulness: they must assist policy makers in assessing the situation 4. Timeliness: they must be produced annually or quarterly to serve as a tool for monitoring 5. Comparability: they must cover the same target population of SMEs for the same time period; target population are firms that are non-financial and independent and have at least 1 employee
  • The ‘Core’ Indicators DEBT SME loans / business loans SME non-performing loans/SME loans SME short term loans/SME loans SME gov. guaranteed loans/SME loans SME interest rates Interest rate spreads (small vs. large firms) SME gov. direct loans/SME loans SME collateral SME loans authorized/SME loans requested EQUITY Venture and growth capital OTHER SME payment delays SME bankruptcies
  • Business loans to SMEs and large firms Korea United Kingdom Quarterly, in KRW millions and as a % of total business loans Business loans, large firms Business loans, SMEs Year-on-year percentage change, as a percentage % business loans, SMEs 600,000,000 Corporations 90% All SMEs (Up to GBP 25m turnover) Small SMEs (Less than GBP 1m turnover) 30 88% 500,000,000 86% 400,000,000 84% 300,000,000 82% 200,000,000 25 20 15 10 80% 78% 100,000,000 5 0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 76% -5 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 -10 2010 -15 Source: OECD Scoreboard, 2011 Source: Bank of England Trends in Lending July 2011
  • l SME Interest rate and spreads, 2007-10 Quarterly, average SME interest rate and spreads between SMEs and large firm rates Denmark Interest rate spread Italy Interest rate, SMEs Interest rate spreads (SME vs large firm) 8 SME average interest rate 7% 7 6% 6 5% 5 4% 4 3% 3 2% 2 1% 1.04 0.96 1.07 0.64 0.86 0.96 1.05 1.36 0.96 1.31 1.18 1.39 1.63 1.36 1.43 1.46 1 0% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 Source: OECD Scoreboard, 2011 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 Source: OECD Scoreboard, 2011 10
  • Collateral requirements Canada % of Small businesses required and not required to provide collateral Thailand Value of collateral provided by SMEs As a percentage of total SME business loans Collateral, Collateral, SMEsSMEs 250% 200% 150% 100% 50% 0% 2007 2008 2009 2010
  • Non-performing loans United States Thailand Annual, as a % of total loan stock Annual, as a % of total business loan Non-performing loans, SMEs Non-performing loans, total 4.5 9% 3.9% 4.0 3.5 7.9% 8% 3.47% 7% 3.0 6.85% 7.6% 7.3% 6% 2.5 Non-performing loans, total 5% 2.0 5.4% 4% 1.89% 3% 1.5 1.0 5.3% 1.22% 2% 0.5 1% 0.0 0% 2007 2008 2009 2010 2007 2008 2009
  • Recommendations to improve data collection and monitoring • Require financial institutions – to use the national definition for an SME, based on firm size – to report on a timely basis to their regulatory authorities SME loans, interest rates, collateral requirements, as well as those loans that have government support • Encourage international, regional and national authorities as well as business associations to work together to harmonise quantitative demand-side surveys • Promote the harmonisation of Venture Capital definitions
  • OECD Scoreboard: How to participate • Nomination of a country expert • Typically specialised in SME finance statistics • Access to data from different sources • Coordination of the expert with the OECD Secretariat – Identification of appropriate data sources – Definitions and proxies – Regular updates
  • THANK YOU Sergio.Arzeni@oecd.org CENTRE FOR ENTREPRENEURSHIP, SMEs & LOCAL DEVELOPMENT(CFE) www.oecd.org/cfe