ADB report: SMEs need finance to grow

Illustrative image (Source: VNA)

In its Asia SME Finance Monitor 2014 released on September 2, the ADB emphasised that SMEs’ growth is key to strong, sustainable growth in Asia as the world recovers from the recent global economic slowdown

The report, which assesses 20 countries in developing Asia, noted that SMEs make up an average of 96 percent of all registered firms and employ 62 percent of the labour force. However, they contribute only 42 percent of economic output.

In the case of Vietnam, the country had a total 359,794 micro, small, and medium sized enterprises (MSMEs) as of the end of 2013, accounting for 96.4 percent of total enterprises in the country. Most of the establishments are privately owned (97.2 percent) while foreign invested enterprises accounted for 2.7 percent and the remaining are state-owned. There were 5.1 million workers employed in the MSMEs sector, accounting for 46.8 percent of the country’s total work force, the report said.

The ADB called on governments in the region to help SMEs become more competitive and able to participate in global value chains. This includes governments making it easier for SMEs to access new financing, such as supply chain finance.

According to the bank, limited access to bank credit is a persistent problem in Asia and the Pacific. It noted that lending to SMEs has declined over the course of the global financial crisis and in 2014, they received only 18.7 percent of total bank loans.

While noting that several countries have made progress tackling this, the ADB said the region needs to further develop credit bureaus, collateral registries, and credit guarantees to expand financial outreach, particularly in low-income countries.

It said governments need to put in place a comprehensive policy framework to help nonbank financial institutions expand their SME financing options. Ongoing efforts to open up the equity markets to SMEs would also help provide SMEs with the long-term financing they need to mature, according to the ADB report./.

Source: VNA