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Policy instruments to improve MSMEs access to external financing in developing countries: A survey

Author

Listed:
  • Modeste Dayé

    (CRED, University of Namur)

  • Romain Houssa

    (CRED, University of Namur)

  • Paul Reding

    (CRED, University of Namur)

Abstract

This paper presents the salient factors that characterize important aspects of firms’ access to external finance in developing countries. Cross-country data show that micro, small and medium-sized enterprises (MSMEs) face more external financing constraints in Low Income Countries than in their rich counterparts. To explain this fact we distinguish both demand and supply factors underlying external financing constraints. We then argue for a catalytic role that development cooperation can play in alleviating these constraints. We present an illustration based on the policy instruments that have been used by development cooperation. Our particular interest is to document how well the Belgium Development Cooperation support of MSMEs compares to that provided by four other European countries: France, Germany, The Netherlands, and Sweden. We conclude with a discussion on the critical policy issues as regards the effectiveness of these interventions.

Suggested Citation

  • Modeste Dayé & Romain Houssa & Paul Reding, 2015. "Policy instruments to improve MSMEs access to external financing in developing countries: A survey," BeFinD Working Papers 0106, University of Namur, Department of Economics.
  • Handle: RePEc:nam:befdwp:0106
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    File URL: http://www.befind.be/publications/WPs/WP6
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    References listed on IDEAS

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    Cited by:

    1. Romain Houssa & Paul Reding & Albena Sotirova, 2017. "Methodological issues of an impact evaluation of development support in agriculture," BeFinD Working Papers 0120, University of Namur, Department of Economics.

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    More about this item

    Keywords

    MSME; external finance; DFI; information asymmetry;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Y10 - Miscellaneous Categories - - Data: Tables and Charts - - - Data: Tables and Charts

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