Four Proposals for Improved Financing of SME Development in ASEAN

Small- and medium-size enterprises (SMEs) are of great socioeconomic significance although their long-term growth and competitiveness have been compromised by the chronic and often acute constraints on their access to formal-sector finance, among other systemic and institutional problems in developing countries, including the Association of Southeast Asian Nations. Largely as a result, SMEs’ share of financing resources is disproportionately less than their relative importance in domestic employment and, to a lesser extent, value added. Proposals to address financing problems on the demand side are made relating to more systematic disclosure of information on finance and governance, and better business planning by SMEs. Parallel capacity building efforts on the supply side include greater reliance on credit information systems, and SME risk scoring and competitiveness benchmarking.