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Solutions for SMEs’ difficulties in accessing finance: Asian experiences

Author

Listed:
  • Yoshino, Naoyuki

    (Asian Development Bank Institute)

  • Taghizadeh-Hesary, Farhad

    (Asian Development Bank Institute)

Abstract

Small and medium-sized enterprises (SMEs) are the backbone of the Asian economy. They make up more than 96% of all Asian businesses that provide 2 out of 3 private sector jobs in the continent. Therefore, it is vitally important for the Asian economies’ economic success that they have fully functioning support measures for SMEs. However, SMEs face major challenges in accessing cheap finance, mainly because there is an asymmetric information problem between suppliers and demanders of funds, which hinders their growth. We highlight the difficulties of SMEs in accessing finance, and provide remedies for mitigating them. The remedies proposed in here include the development of credit information infrastructures for SMEs to remedy the asymmetric information problem, utilization of credit rating techniques for SMEs, the development of a sustainable credit guarantee scheme, the development of specialized private banks for SME financing, and the introduction of new ways of providing community-based financing such as hometown investment trust funds. We will provide operational examples from developed Asian economies such as Japan and the Republic of Korea, and developing Asian economies such as Thailand with a view to them being implemented in the rest of Asia.

Suggested Citation

  • Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2017. "Solutions for SMEs’ difficulties in accessing finance: Asian experiences," ADBI Working Papers 768, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0768
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    References listed on IDEAS

    as
    1. Kuwahara, Satoshi & Yoshino, Naoyuki & Sagara, Megumi & Taghizadeh-Hesary, Farhad, 2015. "Role of the Credit Risk Database in Developing SMEs in Japan: Lessons for the Rest of Asia," ADBI Working Papers 547, Asian Development Bank Institute.
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    4. Poon, Winnie P. H. & Firth, Michael & Fung, Hung-Gay, 1999. "A multivariate analysis of the determinants of Moody's bank financial strength ratings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(3), pages 267-283, August.
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    More about this item

    Keywords

    SMEs; Asian economies; credit rating; CRD; SME bank;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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