Two Trillion and Counting: Assessing the Credit Gap for Micro, Small, and Medium-Size Enterprises in the Developing World
This article analyzes the global micro, small, and medium enterprises (MSME) credit gap. It highlights the possibility of closing the gap through government and private sector efforts. The article emphasizes the need for more and consistent data on MSME numbers, their current use of financial services, and their unmet demand. Such an effort faces a number of data-driven limitations, such as the lack of harmonized definitions across countries, the uneven quantity of data available among countries, and very limited available data covering some areas of the analysis. According to the article, three key issues that governments and private institutions will need to address to close the MSME credit gap are:
- Creating a supportive enabling environment to promote MSME finance;
- Improving financial infrastructure;
- Private sector efforts to meet MSME enterprises’ needs in economically sustainable ways.
The article also mentions the annual Doing Business reports, published by the World Bank Group, that highlight elements of a legal and regulatory framework that encourages lending by financial institutions to the private sector.