Launch of Financing SMEs and Entrepreneurs 2016: An OECD Scoreboard


Remarks by Angel Gurría,

Secretary-General, OECD

14 April 2016

Washington, D.C.

(As prepared for delivery)



Governor, Ministers, Ladies and Gentlemen:


It is an honour to welcome Governor Zhou to our OECD Washington Centre to launch the 2016 OECD Scoreboard on Financing SMEs and Entrepreneurs – the fifth edition of this report.


And it is very timely to focus on the issue of financing for small and medium-sized enterprises (SMEs), as Finance Ministers, Central Bank Governors and other officials from across the globe convene in Washington this week to address the economic challenges our economies are facing – a recovery that remains elusive, with its drivers –  investment and trade – running at half speed.


SMEs typically account for more than half of business sector activity and around two-thirds of employment. Young SMEs, in particular, contribute disproportionately to creating jobs. Yet business dynamics have been slowing in most of our economies, limiting SMEs’ contributions to investment, growth, jobs and social inclusion, at a moment when they are sorely needed. A conducive regulatory framework, stronger entrepreneurial culture, and access to markets, networks, skills and finance are essential to create a level playing field for SMEs and enable them to achieve their potential. They must remain an integral part of the G20 structural agenda.


Finance, in particular, is a critical prerequisite for the creation, growth and development of small businesses, as well as for a vibrant start-up scene. However, some emerging trends are cause for concern. A new OECD report has highlighted that the productivity gap between firms on the technological frontier – that are often large – and the others, the bulk of firms – usually small ones – is widening. While access to finance alone is not a sufficient condition for small firms to innovate, upgrade and become more productive, it is one of the keys to unlocking their potential.


The OECD Scoreboard on Financing SMEs and Entrepreneurs, published annually, provides governments with relevant information on the state of play, including SMEs’ access to finance and the current obstacles they face. Allow me to outline some of the key findings of this report, which we hope will guide the policy agenda going forward.


SME lending generally improved in 2014


Since I presented the 2015 report on this very spot one year ago, there have been some encouraging signs. SMEs’ access to credit appears to have turned the corner. The outstanding stock of SME loans in 2014 surpassed 2013 levels in 20 of the 26 countries that provided data. For example, credit to SMEs expanded by more than 10% in Chile, Colombia and Turkey; even in Greece, annual growth in SME lending surpassed 2%.


On the other hand, progress has been uneven. In Spain, despite a robust expansion of 8.5%, new lending to SMEs stood at only 36% of its pre-crisis level. In the United Kingdom, net lending, the difference between new lending and repayments, only turned positive in the first quarter of 2015, after a continuous decline since 2008.


Credit conditions also generally eased in 2014, but remain challenging for many SMEs


SME interest rates continued to decline in 2014, often significantly. In 2014, the average interest rate charged to SMEs in Chile, Italy and Mexico fell by more than one percentage point year-on-year. But large cross-country differences persist. In countries where a sovereign debt crisis followed the financial crisis, such as Greece and Portugal, real SME interest rates were about twice as high as the median value of Scoreboard countries.


It should also be noted that the median interest rate spread for Scoreboard countries has been increasing continuously since 2007 [when it stood at 0.87 percentage points, to reach 1.57 percentage points in 2014]. In Mexico, SMEs paid interest rates that were, on average, 4 percentage points higher than the rate charged to large firms in 2014.


SME bankruptcies are declining


In contrast to previous years, a majority of Scoreboard countries observed a drop in SME bankruptcies between 2013 and 2014. Bankruptcy rates reflect difficulties in maintaining cashflows and are indicative of the overall financial health of SMEs. In Australia, Korea and Greece, SME bankruptcies declined by between 15% to 20% in 2014. But some countries still face an enormous challenge; for example, in Spain, where bankruptcies decreased by 30.9% in 2014, they remained almost six times higher than before the crisis.


Alternative financing instruments show promise, but reach only a small share of SMEs


Venture Capital (VC) investments and leasing volumes showed encouraging signs of recovery, but remain below pre-crisis levels in most countries, with the exception of Korea, Russia and the United States. In China, leasing and hire purchase volumes increased by more than 50% between 2013 and 2014. Even more striking, the peer-to-peer lending market, which was virtually non-existent in 2012, was estimated at RMB 440 billion in outstanding loans at the end of 2015 – around 0.7% of Chinese GDP, according to the People’s Bank of China.


Nevertheless, small businesses continue to rely too heavily on straight debt, and at their current levels of uptake, alternative instruments cannot fill the gap when bank lending is constrained. Only 3% of SMEs in the euro zone report using equity financing, while more than half rely on bank credit for their financial needs.


Governments are increasingly supporting the diversification of SME financing instruments


We are heartened to see, however, that policymakers are increasingly adopting a two-pronged approach to SME financing, which is consistent with the G20/OECD High-level Principles on SME Financing, welcomed by G20 Leaders in 2015.


On the one hand, additional efforts are being made to improve SME access to debt finance. Governments are taking action through better designed and targeted guarantee schemes, direct lending mechanisms, and interest rate support. But more needs to be done, including by improving the availability of credit risk information and making use of new technologies and mechanisms for underwriting risk.


One the other hand, there is a growing effort to stimulate the development of alternative sources of SME finance. For example, Canada and Chile created or expanded seed capital funds, and Australia and Sweden recently instituted tax incentives for investors in innovative start-ups. Other needed steps include improving transparency of SME markets, providing greater regulatory certainty, ensuring appropriate options for exit, as well as developing financial skills in SMEs.


We are pleased to continue our engagement on this issue with the Chinese Presidency, as we work to identify and develop effective, innovative, successful and country-tailored approaches for the implementation of the G20/OECD Principles.


Ladies and Gentlemen:


We still have a lot to do to create the conditions for the diverse population of SMEs to access finance in the appropriate amounts, forms and terms. The OECD will continue to support the governments of the G20 and beyond in understanding SME financing trends and developing appropriate policy responses, as a part of our broader quest to design, develop and deliver better SME policies for better lives.


Thank you.



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