Lending to SMEs and entrepreneurs is improving, but more diverse forms of financing are needed – OECD

English: The logo of the Organisation for Econ...

English: The logo of the Organisation for Economic Co-operation and Development (OECD). (Photo credit: Wikipedia)

This is an important new report published by OECD. It highlights that financing for small and medium-sized enterprises (SMEs) has turned the corner from the downswing seen during the global financial crisis, but overall credit conditions remain challenging and access to external finance continues to be much tighter for SMEs than larger firms.

Source: Lending to SMEs and entrepreneurs is improving, but more diverse forms of financing are needed – OECD

I was disappointed that the report was not more critical of the major banks who despite all sorts of inducements have failed to leverage loans to SMEs. This is important because typically SMEs generate new jobs more quickly than larger firms.

What the report highlighted for me was the importance of government guarantees. Significantly, France with a socialist government and generally not friendly to entrepreneurs, we find surprisingly high government guarantees. By comparison, in the UK and Southern Europe government guarantees for SMEs are negligible. Part of the problem seems to be the monetary policy and fiscal policy are not coordinated effectively.

In my mind SMEs generally get a raw deal compared to big business. Big business has more effective political lobbying. Governments seem to rely on intermediaries in dealing with SMEs. Most importantly, there seems to be an absence of an effective industry strategy.

Thoughts?

 

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