All over the world, small and medium enterprises (SMEs) play a very critical role in economic development. This is attributed to the massive employment opportunities the key sector creates for citizens as well as its contribution to the growth of the gross domestic product (GDP). SMEs’ development is an effective route to building prosperous, dynamic and sustainable economies in developing countries. Indeed, the sector has been at the heart of modern development. World Bank reports indicate that SMEs account for the majority of businesses worldwide and they are important contributors to job creation. They represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of the GDP in emerging economies. These numbers are significantly higher when informal SMEs are included. The reports also indicate that an estimated 600 million jobs will be needed by 2030 to absorb the growing global workforce.

The Organization for Economic Co-operation and Development (OECD) reports allude to the arguments by World Bank indicating that SMEs are key players in the economy and the wider eco-system of firms. Enabling them to adapt and thrive in a more open environment and participate more actively in the digital transformation is essential for boosting economic growth and delivering a more inclusive globalisation.

Across countries at all levels of development, SMEs have an important role to play in achieving the Sustainable Development Goals (SDGs), by promoting inclusive and sustainable economic growth, providing employment and decent work for all, promoting sustainable industrialisation, fostering innovation and reducing income inequalities. However, boosting their potential for participating in and reaping the benefits of a globalised and digital economy depends to a great degree on a conducive environment and healthy competition. Due to constraints internal to the firm, SMEs are disproportionately affected by market failures and barriers and inefficiencies in the business environment and policy sphere. SMEs’ contributions also depend on their access to strategic resources such as skills, knowledge, networks and finance.

Today, more than ever before, financial services sector is at its tip and it is either we disrupt or get disrupted. In 2017, World Payments Report indicated that global digital payments volumes are approximately 726 billion transactions with volumes generated by emerging economies growing by 19.6%, or three-times the rate of mature economies. In the wholesale sector, worldwide transaction by corporates, mid-sized enterprises and public authorities are estimated to be more than 122 billion.


The fact that access to finance is a key constraint to SMEs’ growth in many countries cannot be over emphasized There is need to find innovative solutions to unlock sources of capital and this is where microfinance institutions come in handy. Microfinance encompasses the provision of financial services and the management of small amounts of money through a range of products and a system of intermediary functions that are targeted at low income clients. According to financial stability theory, monetary and financial stability are of central importance to the effective functioning of a market economy. They provide the basis for rational decision making about the allocation of real resources through time and therefore improve the climate for saving and investment created by SMEs.

As World Bank reports suggest, microfinance Institutions should consider carrying out financial sector assessments to determine areas of improvement in regulatory and policy aspects enabling increased and responsible access to finance for SMEs. They should therefore design and implement credit guarantee schemes, work on improving credit infrastructure (credit reporting systems, secured transactions, collateral registries and insolvency regimes) which can lead to greater access to finance for SMEs. In that respect, MFIs should introduce innovation in SME finance such as e-lending platforms, use of alternative data for credit decision making, e-invoicing, e-factoring and supply chain financing. Finally, they should embrace knowledge management tools for continuous learning and improvement.



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