How to Create an Enabling Environment for SMEs in the Arab World
A short and interesting speech on SME related reforms in the Arab World by IMF’s Managing Director Christine Lagarde.
A range of economic and institutional factors are needed to help scale up SME bank credit. Three common determinants stand out.
First, sound economic fundamentals and financial sectors . This means curbing the size of the state where it crowds out financing for SMEs and creates an uneven playing field with SOEs. It also means a sound and competitive economy and banking sector that facilitate market entry for SMEs.
Second, institutional factors are also essential . This includes good governance and financial supervisory capacity, availability of credit information, and strong legal frameworks. For example, our research shows that increasing the coverage of credit bureaus in the Arab region could raise employment, especially by SMEs.
Third, harnessing the potential of alternative channels of SME finance . For example, by tapping capital markets and supporting the development of SME capital market segments. Fintech is also a potential game changer for SMEs: it can increase competition among credit providers and expand credit information.
See also her speech recently in Dubai- Fourth Annual Arab Fiscal Forum: Laying the Foundations of Good Fiscal Management in the Arab Countries.
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