In the wake of global economic upheavals since the Covid-19 pandemic in2020, SMEs and entrepreneurs have faced formidable hurdles in accessing funding. The recent surge in inflationary pressures has tightened lending conditions, posing a significant barrier to SMEs’ growth and investment endeavours.
The latest edition of “Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard“ was published on March 13th and it meticulously tracks financing trends, conditions, and policy developments across nearly 50 countries. A stark picture emerges: the cost of SME financing soared in 2022, while SME lending witnessed a marked decline. Equity finance, which experienced unprecedented growth in 2021, plummeted sharply the following year. Alarmingly, women-led and minority-owned businesses, already grappling with limited access to venture capital, bore the brunt of these setbacks. The presentation of Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard took place at a special event organised by the Belgian Presidency of the Council of the European Union. It set the scene for five-panel debates exploring different topics on SME financing. Discussions offered the opportunity to assess the latest trends and issues in SME access to finance, including debt, equity and alternative sources of finance, and the state of play of SME finance policies and programmes.
The availability of sustainable finance is expanding, yet small and medium-sized enterprises (SMEs) might find it challenging to tap into this growing financial resource. The increase in sustainable finance offerings is being propelled by regulatory mandates and stakeholder pressure, as well as the need to address transition risks toward achieving net-zero emissions. According to a 2023 OECD survey, both public and private financial institutions (FIs) are increasingly considering climate factors in their operations. They are doing so by providing customized financing solutions for SMEs seeking to invest in net-zero initiatives through various loan options, credit assurances, and other financial tools.
However, SMEs may encounter obstacles in accessing sustainable finance due to their limited capacity to furnish sustainability performance data, which FIs increasingly demand to mitigate risks, design financing mechanisms, and fulfill reporting obligations. Additionally, SMEs run the risk of losing access to finance if they fail to demonstrate credible transition plans toward achieving net-zero emissions, particularly concerning SMEs operating in highly emitting or hard-to-decarbonize sectors.
Amidst these challenges, the Scoreboard spotlights governmental initiatives aimed at bolstering SMEs’ access to finance, with a particular emphasis on funding for sustainable endeavours. However, the road ahead demands a concerted effort to diversify financial sources and instruments. By catering to the unique needs of SMEs and entrepreneurs, we can empower them to drive resilient, sustainable, and inclusive growth in our economies.
Source: INSME Secretariat
