This book's prime audience is government policy-makers. It provides a policy framework for governments to increase micro, small and medium enterprises' access to financial services - one which is based on empirical evidence from around the world. Financial sector policies in many developing countries often work against the ability of commercial financial institutions to serve this market segment, albeit, often unintentionally. The framework guides governments on how to best focus scarce resources on three things: developing an inclusive financial sector policy; building healthy financial institutions; and investing in information infrastructure such as credit bureaus and accounting standards. The book provides examples and case studies of how such a strategy has helped to build more inclusive financial institutions and systems in many countries.

Foreword	p. ix
Acknowledgments	p. xi
Abbreviations	p. xiii
Introduction	p. 1
The Mismatch between MSMEs' Demand for and Financial Institutions' Supply of Quality Financial Services	p. 3
SME Definitions	p. 4
Access to Finance as a Constraint on SMEs	p. 5
Financial Sector Policy Distortions	p. 6
Banks' Lack of Know-How	p. 10
Information Asymmetries	p. 10
High Risks of MSME Operations	p. 12
Good Practices for Addressing MSMEs' Financing Constraints	p. 13
Commercial Bank Innovations in Applying Microfinance Technologies	p. 14
Approach Is Relationship Based	p. 15
Initial Small, Short-Term Loans Are Ratcheted Up Based on Repayment Performance	p. 15
Loan Monitoring and Credit Risk Control Methods Are Intensive	p. 15
Loan Officers' Incentives Are Tied to Loan Portfolio Performance	p. 16
Transaction Costs Are Lowered in Several Ways	p. 16
Full-Cost Pricing Is Adopted to Achieve Sustainability	p. 16
Other Credit Analysis and Risk Management Techniques	p. 17
Emphasis on Cash Flow Analysis to Determine Clients' Ability to Pay	p. 17
In-Depth Knowledge of Clients and Their Businesses	p. 17
Credit Scoring	p. 18
Timely Technical Assistance to Address the Lack of Bank Know-How in SME Finance	p. 18
Other MSME Finance Instruments	p. 19
Guarantee Funds	p. 19
Factoring	p. 20
Leasing	p. 20
Investor Equity (Venture Capital)	p. 21
Factors Underlying the Success of the Institutions Profiled	p. 22
Government Commitment and Political Economy for Reform	p. 22
Commitment and Leadership within the Institutions	p. 23
Learning and Experimentation	p. 23
How Governments Can Help Increase Access to Finance	p. 25
Set the Stage for Innovation by Establishing a Sound Policy Framework for the Financial Sector	p. 26
Liberalize Interest Rates and Promote Competition	p. 26
Have Supportive Regulations Regarding SME Banking, Leasing, Factoring, and Equity	p. 28
Reduce and Rationalize Direct Public Sector Intervention	p. 31
Improve the Legal and Judicial Frameworks	p. 32
Strengthen the Institutional Infrastructure	p. 33
Support Relevant Training and TA for Interested Financial Institutions	p. 33
Provide or Facilitate Initial Financial Support	p. 34
Build the Information Infrastructure	p. 34
Promote Accounting Standards	p. 34
Invest in and Promote Credit Bureaus and Registries	p. 35
Invest in Technology	p. 35
Evaluate Performance and Incorporate Lessons Learned	p. 35
Conclusion	p. 37
Case Studies on Improving Small and Medium Enterprises' Access to Finance	p. 39
The Kazakhstan Small Business Program	p. 39
The Agricultural Bank of Mongolia: Restructuring and Expanding through Downscaling	p. 43
Innovation by the CrediAmigo Program of Banco do Nordeste	p. 48
ShoreBank International, Ltd. in the Caucasus	p. 52
Wells Fargo Credit Scoring Model	p. 57
The Agricultural Cooperative Bank of Armenia	p. 61
Inter-American Development Bank Microenterprise Global Credit Programs in Paraguay	p. 65
Bank Rakyat Indonesia	p. 70
Nacional Financiera and Factoring in Mexico	p. 74
Venture Capital and Small Enterprise Assistance Funds	p. 77
Financial Leasing in Serbia	p. 80
Credit Guarantee Schemes	p. 85
Credit Information and SME Access to Finance	p. 93
Bibliography	p. 97
Table of Contents provided by Ingram. All Rights Reserved.

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Expanding Access to Finance : Good Practices and Policies for Micro, Small, and Medium Enterprises

9780821371770

0821371770

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